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An Old Institution Dies… and a New Bull Market Is Born

After 117 years, the current London Silver Fix is shutting down.

In fact, we know it's going to happen on August 14th for certain.

Free marketeers are excited; for years many have maintained that silver prices are being manipulated.

Ted Butler, for one, publishes commentary with a special focus on the silver market. Ted's likely the most outspoken observer of daily silver futures price machinations anywhere.

Now comes confirmation that the London Silver Fix is finally closing shop.

That in itself isn't proof of manipulation, but the circumstances certainly raise some intriguing questions.

There are clues from its history worth studying – and profits to be made from its demise…

Gold, Silver, and the Historical "Fix"

Only a few months back I told you the London Gold Fix was likely on its way out. Now the odds are even better with its smaller sibling shuttering its operations in less than two months.

What's the big rush? Let's have a closer look.

The London Silver Market Fixing Ltd. currently operates with just three members: Deutsche Bank AG (USA) (NYSE: DB), HSBC Holdings Plc. (NYSE ADR: HSBC), and Bank of Nova Scotia (USA) (NYSE: BNS).

But in the wake of heightened scrutiny of the Gold Fix by market participants and regulators like Britain's Financial Conduct Authority and Germany's Federal Financial Supervisory Authority (BaFin), Deutsche has decided it was simply time to retire from both "Fixes."

That's right, retire. After an unsuccessful bid to sell its seats, Deutsche has said it would resign its spots. With only two members left in the Silver Fix, participants said they simply couldn't function properly.

Why would Deutsche leave in such haste? Maybe it has something to do with the 20 (or more) pending class-action lawsuits, alleging a conspiracy to manipulate gold prices for their own benefit.

In any case, the UK Financial Conduct Authority convinced Deutsche to stay on until mid-August to ensure the silver benchmark system could wind down efficiently.

Ross Norman, Chief Executive Officer of Sharps Pixley (a London bullion broker that dates back to 1852 and was a member of the original London Silver Fixing group), told Kitco News that whatever replaces the current pricing mechanism is likely to be more transparent and technically derived.

CEO of the London Bullion Market Association (LMBA) Ruth Crowell said, "…the LBMA has launched a consultation in order to ensure the best way forward for a London silver daily price mechanism."

John Hathaway, senior managing director and portfolio manager of the Tocqueville Gold Fund, recently said the London Gold Fix is an archaic system that needs a "complete overhaul," and if oil and most other commodities don't get "fixed," then why should gold?

Indeed, why should it… and by extension, why should silver?

Frankly, I'm of two minds on this one.

I'm hopeful that true price discovery will emerge. After all, that's what everyone dealing in gold – investors, speculators, and would-be manipulators – truly deserves.

I'm also a bit cynical that it may take considerable effort to get there. If manipulation exists, I'd expect the benefactors to resist losing their advantages.

That said, I'm an ardent believer in market forces.

Join the conversation. Click here to jump to comments…

About the Author

Peter Krauth is the Resource Specialist for Money Map Press and has contributed some of the most popular and highly regarded investing articles on Money Morning. Peter is headquartered in resource-rich Canada, but he travels around the world to dig up the very best profit opportunity, whether it's in gold, silver, oil, coal, or even potash.

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  1. northwind | June 23, 2014

    I just don't see the end of the "fix" doing much for the market one way or the other. the price changes minute by minute now. Agree in SIL, it's much better than the SLV for leveraged gains with none of the drawbacks. the better miners actually have silver in the ground. does SLV really have all the silver they're supposed to?

  2. Daniel Burke | June 26, 2014

    So what you are saying, it might be a good time to invest in silver?? because i have a fair few OZ already, i was going to invest even more. Would this be a good idea with the meeting in August? i also have a few OZ in gold. What should i do? many sources say keep on to it, some say sell up. After looking at many articals, everyone is saying different accounts?? Can you please advise me.

    KInd Regard

    Daniel Burke

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