Barrick Gold, J.P. Morgan Chase accused of manipulating gold market
The largest retail dealer of gold coins and bullion in the United States filed an anti-trust lawsuit Wednesday against Barrick Gold and investment bank J.P. Morgan Chase, accusing the companies of conspiring to illegally manipulate the gold market.
The lawsuit was filed by Blanchard and Co. of New Orleans on behalf of its clients who bought gold bullion.
A statement from Blanchard said its suit alleges that Barrick and J.P. Morgan injected millions of additional ounces of gold into the market so that the companies made $2-billion US in short-selling profits "by suppressing the price of gold at the expense of individual investors."
"Since the end of 1987, when the collaboration between Barrick and J.P. Morgan began, the growth of global income and wealth would have lifted the gold price to approximately $740 US if the price had been able to respond to the normal laws of supply and demand," Blanchard chief executive Donald Doyle said in a statement.
"If gold had kept pace with inflation, the price today would be approximately $760 US," Doyle said.
Gold was quoted at $342.70 US in afternoon trading Wednesday, up $4.70 US.
Blanchard is alleging that Barrick used private derivative contracts and engaged in off-balance sheet accounting to conceal the addition of billions of dollars worth of gold.
The Blanchard statement says Barrick's actions made it "virtually impossible for gold analysts and investors to determine the size and the market impact of its trading positions."
Blanchard says J.P. Morgan financed Barrick's alleged short selling with "remakably advantageous terms not available to others."
Blanchard is asking the Federal Court in New Orleans to terminate the alleged trading agreement between Barrick and J.P. Morgan.
None of the lawsuit's allegations have been proven in court.
Barrick dismisses lawsuit's allegations as 'ludicrous'
A statement from Barrick Gold called the lawsuit and its allegations "ludicrous and totally without merit" and hinted at legal action.
"Although Barrick has not had an opportunity to review the formal complaint in detail, the company said that the press release contains numerous factual inaccuracies and defamatory statements," Barrick said.
The Barrick statement said it would "vigorously defend the lawsuit and pursue all its legal rights and remedies."
Barrick Gold shares lost 20 cents to close at $24.45; J.P. Morgan shares fell $1.02 US to close at $24 US. Blanchard is a privately-held company.