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Goldman Sachs Offers to Release Aluminum Amid Accusations of Stockpiling

  +Follow August 1, 2013 6:46AM
Tickers Mentioned:

Facing worldwide shortages, Goldman Sachs Group Inc (GS) has indicated that they might run loose some of their massive stores of aluminum. The financial giant has come under intense scrutiny following reports that they were deliberately mismanaging aluminum shipping to cause worldwide shortages and ultimately profit off of a manipulation of the commodities market.

The New York Time alleged that the bank choreographed an “industrial dance” that artificially raised the price of the metal, thus gouging consumers out of billions of dollars. Aluminum is used widely the world over to make soda, juice, and beer cans. The United States alone goes through 90 billion cans of aluminum a year.

Analyst Tim Wiener of beer manufacturer MillerCoors LLC testified to the U.S. Senate that increased warehousing times for aluminum had inflated aluminum prices $3 billion in 2012.

Banks involvement in the commodities market has long been historically prohibited by American regulation. The first indications banks would be able to get into commodity trading began with the gradual dissolution of the Glass-Steagall Act in 1999, which prohibited commercial and investment banks from engaging in the same activities.  In 2003 the Federal Reserve officially began allowing investment banks to trade physical commodities.

If Goldman has been manipulating the commodities market (and evidence is mounting that they did create artificial aluminum scarcity to drive up prices) it raise the question of whether investment banks should be allowed in the commodity market at all. Since the investment banks are now allowed to own warehouses and shipping ventures, they are made privy to knowledge concerning commodity storage and shipping that oftentimes would be considered insider trading. But simultaneously owning commodites and trading their futures is entirely legal, thanks to the 2003 decision.

But possibly not for long.  A proposed new regulatory bill, dubbed the “21st Century Glass-Steagall,” currently enjoys bi-partisan support. And on July 20 the Federal Reserve elected to review that decision, which could force the banks out entirely.

Other investment houses are voluntarily divesting from physical commodities trading, as threat of legal action increases. JP Morgan Chase & Co. (JPM) is fleeing the commodities market altogether, and is putting their entire trading desk up for sale. On July 29, JP Morgan was forced to pay out a settlement of $410 million for engaging in price manipulation of the power market.

But for the time being, Goldman, while releasing a large chunk of their stored metals, have no intention of leaving commodities altogether. Goldman CEO Gary D. Cohn has already said, “Commodity hedging is a core competency and one of the most important things we do in the firm, and our clients really need us to be in that business. We are staying in.”

Goldman’s stock was up .99 percent to close the day at $164.03. The stock is up 23.37 percent on the year.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.

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Results for gs
20 Aug 14 14:30:53
$XHB EOD Data http://t.co/Ifos8vec6D Also See: $SWKS $IAG $FNMA $GS ~
20 Aug 14 14:25:12
Goldman Sachs : Itching To See Libya Try To Prove That It Sold Worthless Derivatives http://t.co/YMl0GVht9y $GS
20 Aug 14 14:25:11
Goldman Sachs : Pay Hike Watch ’15: The Youth Of Goldman Sachs http://t.co/LaZgkPS9NV $GS
Business News Watch
20 Aug 14 14:22:50
$GS: Goldman Sachs to raise junior banker pay by 20 percent -NY Post http://t.co/4n7xM4AtVI http://t.co/JrdnYWN5cA
Laura Marcinek
20 Aug 14 14:22:04
BofA also plans to increase junior employee salaries by 20% next year (similar news from $GS today too) - via @Hugh_Son @BloombergNews $BAC
Jeffrey C. McCracken
20 Aug 14 14:15:52
RT @devinbanerjee: Carlyle's Axalta Coating Systems files for IPO, managed by $C and $GS, confirming scoop last week (http://t.co/XM684crh8…
Greg Roumeliotis
20 Aug 14 14:12:52
RT @devinbanerjee: Carlyle's Axalta Coating Systems files for IPO, managed by $C and $GS, confirming scoop last week (http://t.co/XM684crh8…
Ismael Tillawi
20 Aug 14 14:11:10
RT @devinbanerjee: Carlyle's Axalta Coating Systems files for IPO, managed by $C and $GS, confirming scoop last week (http://t.co/XM684crh8…
Devin Banerjee
20 Aug 14 14:10:49
Carlyle's Axalta Coating Systems files for IPO, managed by $C and $GS, confirming scoop last week (http://t.co/XM684crh8G) @LesliePicker $CG
Sumesh Kumar
20 Aug 14 13:47:08
RT @RudyHavenstein: This may be the greatest paragraph on investing ever written. $GS #studyitup h/t @zerohedge http://t.co/c81qRrrSIy
20 Aug 14 13:31:46
$GS - Prospectus Filed Pursuant to Rule 424(b)(2) (424b2) http://t.co/IM0LBHUINa
20 Aug 14 13:25:59
Massive $LNKD insider selling. What do they know? http://t.co/k0OfzJWl1E $PLUG $MS $JPM $UBS $CS $GS $AAPL $GOOG $FB $TWTR $TSLA $NFLX
20 Aug 14 13:24:34
$GS - Prospectus Filed Pursuant to Rule 424(b)(2) (424b2) http://t.co/wkxOwA0EXq
Business News Watch
20 Aug 14 13:23:01
$GS: Goldman, Goldentree to Acquire 144 U.K. Travelodge Hotels http://t.co/kb5ikiZ5Ys http://t.co/MqaGpSlwzb
Langan Stocks
20 Aug 14 13:16:52
$UUP Yield http://t.co/9ST4dhlpKL Also See: $SLV $NQ $GS $IBB ~
20 Aug 14 12:58:34
Goldman Sachs' Jan Hatzius On CPI Drag $GS http://t.co/XeP6TGH0e0 via @benzinga
Fed Porn
20 Aug 14 12:53:06
I eat octopus 3 times a day. - Tony on $GS http://t.co/dc9wD8NXzO
Carolyn Marshall
20 Aug 14 12:39:53
$GS if you got in too and want to hold overnight, make sure to be around to manage it in the first 30 mins tomorrow, usually need to!
Jesus Cryptos
20 Aug 14 12:34:09
RT @Bidnessetc: #WellsFargo To Double Asset Management Business http://t.co/D5CdnwYGBe $WFC $JPM $GS $BAC $SPY $XLF
Bidness Etc
20 Aug 14 12:33:59
#WellsFargo To Double Asset Management Business http://t.co/D5CdnwYGBe $WFC $JPM $GS $BAC $SPY $XLF
Carolyn Marshall
20 Aug 14 12:31:54
$GS closed the 175 calls at .58 from entry in last hour at .35, just a quicky!
John Turner
20 Aug 14 12:31:10
$GS Goldman Said to Boost Salaries for Junior Staff About 20% http://t.co/ZYouiFuqnM
20 Aug 14 12:24:14
RT @jennablan: Goldman Sachs to raise junior banker pay by 20 percent : NY Post http://t.co/RFHXQRkMcs $GS certainly, because why not
Business News
20 Aug 14 12:22:59
$GS: Goldman Sachs Credit-Sales Co-Head Shaffer to Leave http://t.co/0vxGxLMrel http://t.co/RHC8K00ClM
20 Aug 14 12:16:26
$GS strengthening as expected Banks very very early still Excellent opportunity in this sector
20 Aug 14 12:10:25
SKYF ran up as much as 300% Today! News Update: http://t.co/5A4Sg5sQA5 $GS $ZION $ISRA
20 Aug 14 11:40:02
Berkshire Hathaway agrees to settle U.S. charges on stock deal http://t.co/EjFuQT7nQ7 $BRK.A $USG $GS
20 Aug 14 11:39:05
$GS just ran some short stops.
20 Aug 14 11:37:32
$GS - GS volume spike into the pivot.
Carolyn Marshall
20 Aug 14 11:25:31
$GS plus I needed some "Normalization" as I am net short by way of $SPX , $LNKD and $TSLA. LOL!!!
Carolyn Marshall
20 Aug 14 11:24:16
$GS long weekly 175 calls .35. One of the few things I still play w/straight directionals. Mostly just sell credit and credit spreads now.
20 Aug 14 11:23:35
Very buyable pullback in $GS today
Biz Headlines
20 Aug 14 11:22:52
$GS: Will Goldman Sachs Group Inc (NYSE:GS) Be the Ultimate Victor of the Bidding ... http://t.co/Cm7SOl3OhI http://t.co/Ws47BbhN7o
Stock Forums
20 Aug 14 11:18:04
$UA Day Low http://t.co/5Z1JEmkLRN Also See: $FEYE $GS $SLTD $DDD ~
Justice League
20 Aug 14 11:17:50
Goldman Sachs : to raise junior banker pay by 20 percent : NY Post $GS http://t.co/gOS27AAxdr via @ForTraders
20 Aug 14 11:17:21
$TSLA Change http://t.co/316W668Jdh Also See: $DGAZ $SDS $GS $SNDK ~
20 Aug 14 11:15:00
RT @msttrader: < $GS locking Yellen in a room, going over NEW material for Friday address >
Alan Farley
20 Aug 14 11:13:04
< $GS locking Yellen in a room, going over NEW material for Friday address >
Steve Davis
20 Aug 14 11:04:14
$GS James Covello analyst had a sell on $IRF! Nice
20 Aug 14 11:02:45
@CGasparino @MelissaAFrancis @FoxBusiness Come on say Goldman!!!!!! $GS
20 Aug 14 10:45:38
$ECAU 50 Simple Moving Average $ECAU Most recent stock chart and technical analysis. $GLOG $DUST $WFM $EWG $GS http://t.co/dzmd2sL5M1
David Nohejl
20 Aug 14 10:44:36
RT @CrosbyVenture: Goldman trying to stop the hemorrhaging of young staff by hiking salaries 20%. #desperation $GS http://t.co/lEjv9qtNu0
20 Aug 14 10:40:19
AAALLLL THE EXIT OPPORTUNITIES!!! | "Goldman exec exits for private-equity" http://t.co/4e2ZBbtZfy $GS
Pierce Crosby
20 Aug 14 10:38:57
Goldman trying to stop the hemorrhaging of young staff by hiking salaries 20%. #desperation $GS http://t.co/lEjv9qtNu0
Lazarus Investments
20 Aug 14 10:24:22
Goldman $GS analysts are paid $70-90K salaries w/ bonuses bringing total comp to as much as $140k http://t.co/7QdQXOcsWV via @BloombergNews
Stock News Guru
20 Aug 14 10:22:48
$GS: Goldman Sachs Said in Talks to Settle FHFA Mortgage Suit http://t.co/JUa2Z19v2G http://t.co/qj0DkV7BEv
20 Aug 14 10:17:11
"Worst. Recovery. Ever." Except For #Bankers $GS $MS http://t.co/q94os6wg3B
BNK Invest
20 Aug 14 09:54:58
Video: Dow Movers: $GS $HD #stocks http://t.co/YnTQ9rBeUn
TP Strategic Partner
20 Aug 14 09:37:40
$MS $GS Both doing a stellar job. We're adding
Langan Stocks
20 Aug 14 09:36:58
$SUMR Shares http://t.co/kMdpUSRJsN Also See: $GRUB $SIRI $GOOGL $GS ~
  +Follow August 1, 2013 6:46AM



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