Can gold price be rigged? – Jayant Manglik – Religare Online

Can gold price be rigged? – Jayant Manglik – Religare Online


The answer is NO!
Gold prices are fixed twice a day by a process called London Fix at 10.30 am and 3 pm London
Time daily by 5 members of London Gold Market Association. This is done to provide recognized
trading price which acts as a benchmark for gold and gold traded derivatives and products
across the globe. Trading in gold futures takes place across
the world. In India Gold future contracts worth Rs.5000cr and silver future contacts
worth Rs 3000cr get traded in a day. At COMEX Gold worth Rs 110000cr per day and silver
amounting Rs 25000 per day gets traded. These huge figures make it very difficult to corner
gold and silver market. There have been instances when attempts have
been made to corner the bullion market. In late 70s, Hunt Brothers noticed that inflation
is eating away into their wealth and started finding out ways to keep their wealth intact.
Gold was their first choice for investment but during that time gold prices could easily
be changed by the government. So they considered buying silver. At that time (in 1974) silver
was trading at $2/ounce. They started buying it and in next few years the price of silver
went up to $53/ounce. Thereafter the market regulator CFTC intervened. Hunt Brothers had
owned silver equal to the average trading volume for a month at that time, approximately
120 million ounces. CFTC came up with a rule that no more silver can be bought hereon and
contracts can only be liquidated which became the reason of steep fall in silver prices,
bringing silver from $53/oz to $10/oz. Hunt brothers were imposed with a penalty of $100million
and they had to file for bankruptcy. This whole event paved a way to create the existing
system in which it is almost impossible to rig the huge bullion market. Nobody was allowed to buy contract only contacts
were allowed to be liquidated which lead to swift fall in the silver prices from $53/ounce
to $10/ounce. Hunt brothers were imposed with a penalty of $100million and bankruptcy was
filled by them. So it’s because of the size and regulation on these bullion commodities
is virtually impossible to rate the price.

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