Blanchard and Co. Inc. has filed an anti-trust suit against Canada's Barrick Gold Corp. and J.P. Morgan Chase & Co. of New York, accusing them of suppressing gold prices and then making $2-billion (U.S.) in profits from short selling.
The suit, filed in U.S. District Court for the Eastern District of Louisiana, was brought by New Orleans-based Blanchard — the biggest retail dealer of physical gold in the United States — as well as clients who bought gold bullion.
"Blanchard is paying the costs of the suit, which asks the Federal Court to terminate the trading agreements between Barrick and J.P. Morgan Chase and other, as yet unnamed, bullion banks," the company said.
"Blanchard believes its clients suffered substantial losses as a result of Barrick's and J.P. Morgan Chase's unlawful price manipulation, anti-trust violations and unfair trade practices."
Blanchard's claims are allegations and have not yet been proven in court.
In a subsequent statement, Barrick quickly dismissed the accusations as "ludicrous and totally without merit." Although it had yet to receive a copy of the suit, the gold producer said Blanchard's press release contained "numerous factual inaccuracies and defamatory statements."The suit alleges that over the last five years, Barrick and J.P. Morgan injected millions of additional ounces of gold into the market. Those additions, it said, amounted to several times the annual production of every gold mine in South Africa.
"By using privately negotiated derivative contracts and concealing the addition of billions of dollars worth of (physical) gold with off-balance sheet accounting, Barrick was able to make it virtually impossible for gold analysts and investors to determine the size and the market impact of its trading positions," Blanchard alleges.
J.P. Morgan, the suit alleges, financed Barrick's short selling through "remarkably advantageous" terms not available to others, including deferred repayments and no margin calls.
"Over the past five years, J.P. Morgan Chase loaned gold to Barrick at approximately 1.5 per cent; sold the gold into the market and invested the dollar proceeds at approximately 6.5 per cent," the suit claims.
"Then [it] paid both the proceeds from the sales and the 5-per-cent interest differential to Barrick whenever it repaid any of the borrowed gold."
© The Globe and Mail
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.
