No Golden Egg for Stocks

The suit also alleges Barrick executives made bullish comments about gold over the years even as they were increasing their employment of this program.

The notion that Wall Street firms (led by J.P. Morgan) have conspired with gold hedgers (led by Barrick) to suppress the price of gold is something that's been discussed openly in gold circles for some time now. But concrete evidence has been lacking. Whether Blanchard's case is sufficient to hold up in court remains, of course, to be seen.

On a seemingly unrelated note, I was speaking with Michael Painchaud, director of research at Market Profile Theorems in Seattle yesterday, and he made an observation that seems potentially prescient in light of this lawsuit. "Right now we're seeing financials scoring at lower end of the normal range" in terms of insider buying, Painchaud said. "We're looking over our shoulder that there may be some big problem here in this area down the road. It's an area of concern for us."

Another scandal and more lawsuits are certainly the last thing financial firms, most notably J.P. Morgan, need at this juncture.

Parting Thoughts

Then again, the lawsuit buttresses Blanchard's stated position that it "advised our clients to avoid gold like the plague until such time as the free market laws of supply and demand were allowed to dictate the price," according to their release.

To that point, I'd like to reprise what Jean-Marie Eveillard, manager of the $97 million (symbol Quote)First Eagle SoGen Gold fund, has often said when I've asked about this topic: Any attempt to manipulate gold (or anything else) will ultimately prove futile if the fundamentals support a rise in the asset in question.