Anyone who has been paying attention to the precious metals world over the last couple of years is well aware of the circumstantial evidence of price manipulation. None of which is particularly surprising, as all the way up through the gold pool of the late 1960s, it has been the open policy of the US and UK governments to control the dollar price of gold.
At the beginning of this year, Nick Laird of Sharelynx published the most statistically significant evidence of this price manipulation that I have seen. I was surprised at the time, that it didn’t get more widespread coverage. With recent events in mind, I thought it was a good time to review his findings in case anyone missed them previously.
Mr. Laird took thirteen years of LBMA gold price data, directly off of their website, and constructed a plot that clearly shows a massive bias in returns. For each year he created two bars. The first bar is the annual gain or loss that you would have experienced if you had bought gold at the London PM fix and then sold it at the London AM fix every day. The second bar is the annual gain or loss you would have experienced if you had purchased gold at the London AM fix and sold it at the London PM fix.
The results are amazing. For every single year of the entire gold bull market, the annual return from the AM fix to the PM fix was a loss. Statistically speaking, there is no way that this is possible in a free market environment.
The next plot shows the gold price since 1970 (red) and what it would have been if it had not traded at all between the AM and PM fix (blue). The difference is remarkable. Yes, that’s $13,000/oz gold. It also clearly demonstrates that this particular mechanism of gold price manipulation began in earnest in 1999.
And finally, here’s fours years worth of the daily gold price averaged into a single graph. In a free market this plot should resemble a straight line, as you would not expect any particular time of the day to perform better or worse, consistently, for four years. But as you can see. it is anything but a straight line and anything but a free market.
The LBMA has absolutely nothing to do with price discovery and everything to do with price setting.