Fixing the Silver Fix By Jocelynn Smith, Managing Editor Dear Sovereign Investor, The year was 1897. Queen Victoria sat on the British throne, Sherlock Holmes kicked off his "Adventure of Abbey Grange" and the Blackwall Tunnel under the River Thames was completed. Also during that year, representatives from three different trading firms met in a closed room in London to decide the price of silver for that day. Shortly after noon, the men emerged, the price was announced and trades were completed. It was very first silver fix. On that first day, silver priced at 27-9/16 pennies in old British money (compared to Friday's price of 11.91 pounds an ounce).
That process changed very little in the past 117 years — until this week. The three players also changed into HSBC, Deutsche Bank and Bank of Nova Scotia. But their closed-room meetings were just as private as they were back then, even if they were conducted during a daily conference call.
The last "fix" was established on Thursday and marked the end of an era.
In response to demands for improved transparency, the silver "fix" has finally been dragged into the 21st century.
The new system called the London Silver Price is run by exchange operator CME Group and Thomson Reuters. The London Silver Price will be established through an electronic "equilibrium" system that uses trading on the over-the-counter market and determines the price through an algorithm. The daily price will be announced at noon London time.
The new electronic system will reduce the risk of price manipulation around pre-set benchmarks that has been cropping up with disturbing regularity across the market. Barclays has been fined, because a trader seeking to influence the gold fix, while 27 further lawsuits related to the gold fix are in U.S. federal courts. In 2012, the LIBOR manipulation scandal broke and earlier this year was the forex currency fixing scandal.
Moving the pricing out of the hands of men around a table and to a mathematical algorithm increases our confidence in the market, while reducing the need for yet more oversight and regulation. I think we've all grown more than a little weary of backroom shenanigans tinkering with precious metal prices.
Silver and a handful other precious metals are a great way to protect yourself against the inevitable demise of fiat currencies. The Sovereign Society has been warning its subscribers about this danger for years and welcome this change.
New systems are currently under review for the gold, platinum and palladium fix. And this change can't happen soon enough!
Regards,
Jocelynn Smith
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