The London gold fix, the benchmark used by miners, jewelers and central banks to value the metal, may have been manipulated for a decade by the banks setting it, researchers say.

Unusual trading patterns around 3 p.m. in London, when the so-called afternoon fix is set on a private conference call between five of the biggest gold dealers, are a sign of collusive behavior and should be investigated, New York University’s Stern School of Business Professor Rosa Abrantes- Metz and Albert Metz, a managing director at Moody’s Investors Service, wrote in a draft research paper.

“The structure of the benchmark is certainly conducive to collusion and manipulation, and the empirical data are consistent with price artificiality,” they say in the report, which hasn’t yet been submitted for publication. “It is likely that co-operation between participants may be occurring.”

The paper is the first to raise the possibility that the five banks overseeing the century-old rate -- Barclays Plc, Deutsche Bank AG, Bank of Nova Scotia, HSBC Holdings Plc and Societe Generale SA -- may have been actively working together to manipulate the benchmark. It also adds to pressure on the firms to overhaul the way the rate is calculated. Authorities around the world, already investigating the manipulation of benchmarks from interest rates to foreign exchange, are examining the $20 trillion gold market for signs of wrongdoing.

Union Jacks

Officials at London Gold Market Fixing Ltd., the company owned by the banks that administer the rate, referred requests for comment to Societe Generale, which holds the rotating chairmanship of the group. Officials at Barclays, Deutsche Bank, HSBC and Societe Generale declined to comment on the report and the future of the benchmark. Joe Konecny, a spokesman for Bank of Nova Scotia, didn’t respond to requests for comment.

Abrantes-Metz advises the European Union and the International Organization of Securities Commissions on financial benchmarks. Her 2008 paper “Libor Manipulation?” helped uncover the rigging of the London interbank offered rate, which has led financial firms including Barclays Plc and UBS AG to be fined about $6 billion in total. She is a paid expert witness to lawyers, providing economic analysis for litigation. Metz heads credit policy research at ratings company Moody’s.

The rate-setting ritual dates back to 1919. Dealers in the early years met in a wood-paneled room in Rothschild’s office in the City of London and raised little Union Jacks to indicate interest. Now the fix is calculated twice a day on telephone conferences at 10:30 a.m. and 3 p.m. London time. The calls usually last 10 minutes, though they can run more than an hour.

Unregulated Process

Firms declare how many bars of gold they want to buy or sell at the current spot price, based on orders from clients and themselves. The price is increased or reduced until the buy and sell amounts are within 50 bars, or about 620 kilograms, of each other, at which point the fix is set.