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AIS Capital Management Sets The Record Straight On Gold Fix Lawsuit

By Kitco News
Tuesday March 11, 2014 3:22 PM

(Kitco News) - There is an apparent mix-up over who is behind a class-action suit involving five banks and charges of gold price manipulation. 

According to several articles, the lawsuit was filed Monday by Hausfeld LLP, a Washington-based law firm on behalf of the investment management firm AIS Capital Management.

However, John Hummel, managing principal of AIS says not so. 

Hummel now wants to correct the perception that the firm instigated the class action against the five banks; Barclays PLC (NYSE: BCS), Deutsche Bank (NYSE: DB), HSBC Holdings PLC (NYSE: HSBC), Bank of Nova Scotia (NYSE: BNS) (TSX: BNS) and Société Générale SA, over allegations that they conspired to manipulate the price of the yellow metal on the London gold fix. 

Hummel said the idea for the lawsuit did not come from AIS, but was initiated by the law firm Hausfeld; however, Hummel added that AIS has agreed to participate in the class action suit.

“Our response has always been to participate in class action suits if we think they have any merit. We have a fiduciary responsibility to our clients to participate,” he said.

For its gold portfolio, AIS invests mostly in gold-mining stocks, which lost ground in 2013 as the price of gold ended the year down 29%. 

Kitco News reached out to Hausfeld but the firm refused to comment on the lawsuit. Kitco News also reached out the banks named in the lawsuit, only Société Générale responded with no comment.

The London gold fix has been under intense scrutiny since the start of the month when a preliminary report was released and alleged the gold price was being rigged during the process.


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The report was co-authored by Rosa Abrantes-Metz, New York University’s Stern School of Business Professor and Albert Metz, a managing director at Moody’s Investors Service.  The report, which has not been published, said there were “unusual trading patterns” around 3 p.m. London time during the teleconference between the five major banks involved in the price-discovery process.

The report looked at trade data from 2001 to 2013 and it noted that from 2004 there were frequent spikes in spot gold prices during the afternoon call. These spikes weren’t seen in the data prior to 2004 nor during the morning fix.

The report added that the structure of the gold fix process is “certainly conducive to collusion and manipulation,” and that there is likely cooperation between participants.

News agencies are also reporting that the news of the lawsuit caused a significant drop in shares of Barclays Plc (NYSE: BCS) as it ended the North American session down more than 3% on Monday. HSBC Holdings PLC (NYSE: HSBC) closed down less than 0.5% on the day. The Bank of Nova Scotia (NYSE: BNS) (TSX: BNS) ended the day up 1% in New York and Toronto.

By Neils Christensen and Sarah Benali of Kitco News; nchristensen@kitco.com , sbenali@kitco.com,

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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