Barclays Busted with $44 Million Fine over Gold Pricing Fix
Barclays has been slapped with a £26 million ($43.8 million) fine by a British financial regulator after allowing a trader to manipulate gold prices at the expense of a customer. The fine comes exactly one day after the bank was fined for rigging Libor interest rates in 2012.
Financial Conduct Authority, the regular who issued the fine, said Barclay failed to “adequately manage conflicts of interest between itself and its customers as well as systems and controls failing, in relation to the gold fixing” between 2004 and 2013.
The FCA also fined the former Barclays trader, Daniel James Plunkett, and barred him from participating in any regulated financial activity. The FCA said Plunkett profited at the expense of a customer, who was later fully compensated by Barclays.
"A firm's lack of controls and a trader's disregard for a customer's interests have allowed the financial services industry's reputation to be sullied again," said Tracey McDermott, the FCA's director of enforcement and financial crime.
“Traders who might be tempted to exploit their clients for a quick buck should be in no doubt – such behaviour will cost you your reputation and your livelihood.”
According to FCA reports, Plunkett sent an email on June 28 to commodities colleagues saying that he was hoping for a “mini puke” the following day. Plunkett reportedly fixed the price in order to avoid the payment of $3.9 million to a customer under an option, which helped advance his own trading book by $1.75 million.
The incident occurred on June 28, 2012, a day after UK and U.S. regulators fined the company $450 million over attempted Libor rigging.
"Plunkett's actions came the day after the publication of our Libor and Euribor action against Barclays. The investigation and outcomes in that case meant that the firm, and Plunkett, were clearly on notice of the potential for conflicts of interests around benchmarks," McDermott said.
Barclays Chief Executive Anthony Jenkins is working to restore the bank’s bad reputation after a series of scandals and criticism in recent years.
“We very much regret the situation that led to this settlement,” Jenkins said in a statement. “Barclays has undertaken a significant amount of work to enhance our systems and controls and is committed to the highest standards across all of our operations.”
Barclays is the first bank to be fined over attempted manipulation of the 95-year old London gold market daily fix.
Copper, iron ore surge as Chinese investors unleash demand
The reopening of major industrial economies is sparking a surge across commodities markets from corn to lumber, with tin climbing above $30,000 a tonne for the first time since 2011 on Thursday.
In the wake of mounting evidence of inflation fuelled by higher raw materials prices, investors are also increasingly focused on when the U.S. Federal Reserve might start throttling back its emergency support.
Many banks say the rally has further to run, particularly for copper, which will benefit from rising investment in new energy sectors. Copper is at the highest in a decade, fueling bets it will rally further to take out the record set in February 2011. Steel demand is surging as economies chart a path back to growth just as the world’s biggest miners have been hampered by operational issues, tightening ore supply.
“The long-term prospects for metals prices are ‘too good’ and point to higher prices in the next few years,” said Commerzbank AG analyst Daniel Briesemann. “The decarbonization trends in many countries, which include switching to electric vehicles and expanding wind and solar power, are likely to generate additional demand for metals.”
Trading house Trafigura Group and several major Wall Street banks including Goldman Sachs Group Inc. and Bank of America Corp. expect copper to extend gains.
Copper rose as much as 1.6% to $10,108.50 a ton on the London Metal Exchange before trading at $10,080 as of 4:07 p.m. in London.
Benchmark spot iron ore prices rose to a record, while futures in Singapore and China climbed.
The boom comes as China’s steelmakers keep output rates above 1 billion tons a year, despite a swath of production curbs aimed at reducing carbon emissions and reining in supply. Instead, those measures have boosted steel prices and profitability at mills, allowing them to better accommodate higher iron ore costs.
Spot iron ore with 62% content hit $201.15 a ton on Thursday, according to Mysteel. Futures in Singapore jumped as much as 5.1% to $196.40 a ton, the highest since contracts were launched in 2013. In Dalian, prices closed 8.8% higher.
Erik Hedborg, Principal Analyst, Steel at CRU Group commented: “Recent production cuts in Tangshan have boosted demand for higher-quality ore and prompted mills to build iron ore inventories as their margins are on the rise. Iron ore producers are enjoying exceptionally high margins as well, around two thirds of seaborne supply only require prices of $50 /dmt to break even.”
Still, some analysts including Commerzbank’s Briesemann expect a short-term correction as metals become detached from fundamentals. There’s also a risk that China could engage in policies that may cool demand for iron ore and copper.
The metals rally has boosted concerns about short-term Chinese demand. Some manufacturers and end-users have been slowing production or pushing back delivery times after costs surged, while weaker-than-expected domestic consumption has opened the arbitrage window for exports.
Tin climbed as much as 2% to $30,280 a ton on the LME, boosted by rising orders for the soldering metal. Tin is at the highest since May 2011, with a 48% gain this year making it the best performing metal on the LME.