Tag Archives: London Gold Silver Fix

London Silver Fix daily Price Fix set to end 14 August

New Silver Benchmark Seen Heralding Gold Fix Revamp

Proposals to replace the 117-year-old system of fixing prices for the $5 trillion silver market are poised to add more transparency for the London benchmark used in the $18 trillion gold industry as well.

London Bullion Market Association members will hear firms’ proposals tomorrow for alternatives, including electronic trading, to replace the silver fixing by banks that began in 1897. The daily procedure will end Aug. 14, when Deutsche Bank AG quits the meetings as part of the German company’s exit from commodities, leaving just two banks to set prices. The World Gold Council yesterday called for a meeting next month for the industry to discuss changes to its own valuation process.

Precious metals are getting more attention from regulators after price rigging in everything from interbank lending rates to currencies led to fines and overhauled financial benchmarks. The U.K.’s Financial Conduct Authority in May fined Barclays Plc after a trader sought to influence the gold fix in 2012. An LBMA survey last month showed the market wants a new silver system to be an electronic, auction-based process with more direct participants and prices that can be used in trades.

“The process is somewhat antiquated,” Courtney Lynn, the treasurer for Chicago-based Coeur Mining Inc., the biggest U.S.- based primary silver producer, said June 12. “In that sense, it could use some updating. If the silver process ends up working well and the market feels that they can remove a certain level of regulatory risk, I think they’ll opt to move to the silver pricing mechanism” for gold, she said.

Fixing Prices

About $5 trillion of silver and $18 trillion of gold circulated globally last year, according to CPM Group, a New York-based research company. Silver was fixed at $19.94 an ounce in London today, for a 2.3 percent gain this year. Gold climbed 7.3 percent this year to $1,293 an ounce by its afternoon fixing today. Gold for immediate delivery reached a record $1,921.17 in 2011, the year silver touched $49.8044, according to Bloomberg generic pricing.

London Silver Market Fixing Ltd. said in May it would stop administering the benchmark, used by everyone from mining companies to central banks to trade or value metal, once Deutsche Bank ends its participation on Aug. 14. The German lender, HSBC Holdings Plc and Bank of Nova Scotia conduct the silver fixing, which first took place more than a century ago at the office of Sharps & Wilkins with former dealers including Mocatta & Goldsmid, Pixley & Abell, and Samuel Montagu & Co.

Deutsche Bank

Deutsche Bank, Germany’s biggest lender, said in January that it would withdraw from participating in setting gold and silver benchmarks in London, a month after announcing that it would cut about 200 jobs in commodities and exit dedicated energy, agriculture, dry-bulk and base-metals trading. JPMorgan Chase & Co., Morgan Stanley and Bank of America Corp. also are retreating from raw materials.

Politicians and regulators have pressed banks to cut back their commodities activities to reduce balance-sheet risk, while earnings were eroded by lower volatility in raw materials and reduced client interest. Market-making and liquidity in the European and U.S. power, industrial metals and bulk commodities areas suffered the most as banks retreated, Paul Hawkins, global head of commodities at Credit Suisse Group AG, said at a briefing in London on May 22.

During fixings, member banks declare how much metal they want to buy or sell for clients as well as their own accounts. Traders relay shifts in supply and demand to clients and take fresh orders as the spot price changes, before the fix is made. Participants can trade the metal and its derivatives on the over-the-counter market and exchanges during the calls.

Companies’ Proposals

Autilla Ltd., Bloomberg LP, CME Group Inc./Thomson Reuters, ETF Securities Ltd., Intercontinental Exchange Inc., the London Metal Exchange and Platts will present proposals for a new silver mechanism at a seminar in London tomorrow, the LBMA said in a statement today. The solution should be agreed by the market and announced in early July, after consultation with regulators, it said. Testing is planned for early August.

A new gold mechanism or changes to the current procedure should be based on executed trades rather than submitted quotes, be tradeable and not just a reference price, while data should be transparent, published and subject to audit, the World Gold Council said in a statement yesterday. It will hold a meeting July 7 in London for the industry to discuss changes.

“The fixing process needs to be reformed,” Natalie Dempster, managing director, central banks and public policy at the council, said yesterday in a phone interview. Still, whatever method is developed for silver won’t necessarily be appropriate for gold, partly because of differing user bases and supply chains for each metal, she said.

Prices Published

While there’s been no notice from fixing banks or regulators that the gold rate should be replaced, the processes for setting gold, silver, platinum and palladium are much the same. Fixing companies, the LBMA and the London Platinum and Palladium Market publish the rates on their websites. Trade and volume data aren’t disclosed.

Societe Generale SA, Bank of Nova Scotia, HSBC and Barclays are the four remaining members of the London gold fix, which takes place twice daily and dates back to 1919. Spokesmen for Societe Generale, Barclays and HSBC declined to comment. Joe Konecny, a spokesman for Bank of Nova Scotia, didn’t reply to voice messages or e-mails sent by Bloomberg.

Fixing Company

Nobody was available to comment when calls were made by Bloomberg to a phone number listed on the London Gold Market Fixing Ltd.’s website. Douglas Beadle, who has been a consultant to the fixing company, didn’t reply to a message left by phone.

The LBMA is “happy to participate in discussions on issues which are designed to ensure the continued efficiency” of the gold and silver markets, Ruth Crowell, chief executive of the organization, said in an e-mailed statement yesterday.

The fixing still works well, even as scrutiny on the way prices are set has increased, according to David Govett, the head of precious metals at Marex Spectron Group in London and a trader for 30 years. With four members still setting the gold rate, the benchmark could continue, he said.

When asked to rate the usefulness of the current silver mechanism on a scale up to 10, an LBMA survey in May of more than 440 participants returned an average of 7.5. Sixty-four percent said they use the fixing daily and 72 percent said the price discovery method is sufficient.

Manipulation Possible

While traders say fixings are efficient and a crucial reference point, economists and academics say the process is susceptible to manipulation and lacks sufficient regulation. Germany’s Bafin is looking at benchmarking processes such as gold and silver price fixing at individual banks, a spokesman for the Bonn-based regulator said in April.

At least nine financial firms, including Deutsche Bank and Barclays, have been fined more than $6 billion for manipulating the London interbank offered rate, or Libor, and related benchmarks. Twelve people are facing prosecution in U.K. investigations. Regulators and prosecutors across three continents are also looking into possible manipulation of the foreign-exchange market in a probe that has seen more than 30 traders fired, suspended or put on leave.

Britain’s FCA has been visiting member banks involved in the gold fixing this year as part of its review of gold benchmarks, a person with knowledge of the matter said in April. The regulator said May 23 it fined Barclays 26 million pounds ($44 million) because one of its traders sought to influence the price-setting process in 2012.

New Benchmark

A new benchmark won’t be developed in the style of the present fix, Brian Lucey, a finance professor at Trinity College Dublin who has been an economist for the Central Bank of Ireland, said by phone June 17.

“When the gold and silver fixes were first set, they were pretty much the only game in town,” Lucey said. “Now we have the data which allows us to get a really good handle on the market. A mechanism that gives more information about more of the market is better for all.”

(originally reported by Bloomberg – http://www.bloomberg.com/news/2014-06-18/new-silver-benchmark-seen-heralding-gold-fix-revamp-commodities.html)

The London Silver Market Fixing Limited

Incorporated in England and Wales With Registered Number 3685039; Registered Office: One Silk Street, London EC2Y 8HQ

LONDON, UNITED KINGDOM–(Marketwired – May 14, 2014) – The London Silver Market Fixing Limited (the ‘Company’) announces that it will cease to administer the London Silver Fixing with effect from close of business on 14 August 2014. Until then, Deutsche Bank AG, HSBC Bank USA N.A. and The Bank of Nova Scotia will remain members of the Company and the Company will administer the London Silver Fixing and continue to liaise with the FCA and other stakeholders.

The period to 14 August 2014 will provide an opportunity for market-led adjustment with consultation between clients and market participants.

The London Bullion Market Association has expressed its willingness to assist with discussions among market participants with a view to exploring whether the market wishes to develop an alternative to the London Silver Fixing.


1. What will happen after 14 August 2014? Will the Silver Fixing cease to exist?

With effect from the close of business on 14 August 2014, the Company will cease to administer a Silver Fixing, and a daily Silver Fixing Price will no longer be published by the Company.

2. What will happen in the period up to that date?

The Company intends to continue to administer the daily Silver Fixing and publish Silver Fixing Prices throughout that period.

3. Why a three month notice period?

Although members of the Company may resign on seven clear days’ notice, the members have confirmed that they stand ready to continue the Company’s operations until (and including) 14 August 2014.

4. What happens after 14 August 2014 for market participants with contracts referencing the Silver Fix?

The Company is not in a position to comment on such matters, but market participants can speak to their contractual counterparties.

5. What does this mean for the gold, and platinum and palladium fixing companies?

This decision relates only to the London Silver Fixing administered by the Company. The Company is not in a position to comment on other fixings.

(originally reported by Reuters – http://www.reuters.com/article/2014/05/14/idUSnMKWWsY3ca+1e8+MKW20140514

Why is Gold and Silver Going Down

After receiving a few concerned calls about the recent market activity, I thought I share my opinion on the current market conditions. To truly understand why gold and silver spot prices are going down, one has to understand the current Economic climate. Currently there is a lot of uncertainty in the market place. Policy makers have not proposed a clear blue print for the future, so nobody is really taking any long term positions in the market. With that said traders still have to go to work and try to earn a living.

As an ex-trader, I can share a few things with you that might ease some of the stress that you might be dealing with now. When there is uncertainty in the market place, traders rely heavily on technical charts and market indicators. They go in and out of positions faster than they could digest their lunch. It’s also important to note that spot prices are affected by trading “paper gold” and not physical. Even thou the paper market have been selling off, the physical market has not been able to keep up with demand. To date in 2013 the US mint has sold 406,500 ounces of physical gold and 10,044,500 ounces of physical silver, some of the highest reported numbers since 2008.

Until the looming fiscal cliff and debt ceiling issues are resolved there will be a tremendous amount of volatility with the precious metals market.  As the equities markets are gaining ground due to the artificial strengthening of the US dollar, Traders are taught to bet against precious metals. It’s also important to note that most positions are only trading for a short amount of time as Traders scalp the market and take profits where they can. This market activity creates buying opportunities for long term position holders in precious metals.
Let’s take a look at some technical’s to get a better sense of what’s happening to the market and try to predict some buying opportunities

Gold Chart

As you can see Gold is approaching a resistance line of $1,540.59 many traders are waiting for that number to be reached before putting in buying orders. You can be sure that right now is a great time to buy gold, if you wanted to cost average your gold position, or get into the market.  It’s important to note that gold prices may never reach the resistance number so waiting for that number to be reached before pulling the trigger may not be a wise move.

Silver Chart 2.21.13

With silver we can see that there are 2 major resistance lines 1 at 28.09 the other at 26.32. With the industrial demand for silver higher than ever, reaching the second resistance line is unlikely to occur. The next major event is scheduled February 26-27 semi-annual testimony on monetary policy to Congress by Federal Reserve Chairman Ben Bernanke. Although he is probably going to avoid talking about the Fiscal Cliff the markets will be watching for any indicators of possible policy.

In conclusion it’s important to remember that physical gold and silver positions are “long term” hedges against the declining dollar. There will always be temporary market adjustments and volatility. Understanding fundamentals of an economy is what successful investors base their actions on.  Currently our unemployment numbers are not improving, we are not creating any more jobs or importing less goods. Additionally, we are printing more money than ever with the green light of QE3. All these factors make for favorable market condition for a long term position in precious metals. The current economic climate has provided a great buying opportunity. This is the time that clients should “dollar cost average” their metals position or enter into precious metals for the first time. We may not see metals at these prices ever again.
As always, please don’t hesitate to call me or your Numis Financial account executive to discuss current market conditions, product specials and more.