The Beginning Of The End Of Precious Metals Manipulation: The London Silver Fix Is Officially Dead

Tyler Durden's picture




 

Following a crackdown on precious metal manipulation by various European regulators (mostly Germany's BaFin, recall "Precious Metals Manipulation Worse Than Libor Scandal, German Regulator Says"), which led to the shocking outcome that Deutsche Bank would pull out of the London gold and silver fixing committees, the London Silver Market Fixing company ended up with a most curious outcome: it would have just two members: HSBC and Bank of Nova Scotia. And, as an even more shocking result, overnight the London Silver Fix announced that after August 14, 2014 it will no longer exist - the first of many victories for all those who have fought for fair and unmanipulated precious metal markets.

From the press release:

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.

Q&A

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

* * *

This huge loss for precious metal manipulators fixers was amusingly "explained" by the FT's John Dizard as follows: "The field may be more level, but there are not enough players left for a game." Mocking those who prefer unmanipulated markets, he said:

... once that satisfying self-righteous feeling passes, the dwellers on BaFin Island might want to consider whether they have helped create a level playing field without enough players for the game. So far, it would appear the significant beneficiaries of BaFin’s persuasion have been the less-than-systemically important dealers in international silver markets. While there will still be four participants in the London gold fix, the similarly structured 12pm London silver fix will now have only two participants, which common sense tells us means no real market at all.

Actually, it will mean no manipulated market by a handful of participants. It will also mean that going forward a much more transparent pricing mechanism will have to be adopted: once which relies on, gasp, the entire market, not just legacy firms that operated for decades out of Rothschild's wood-panelled London basement.

Of course, for Gizard, there is no manipulation:

Deutsche Bank will have withdrawn from participating in the ritual of setting a standard price for physical gold. While no wrongdoing by any of the gold-fixing participants has been proven legally, or even, I believe, convincingly demonstrated in econometric modelling, Deutsche apparently came under intense social pressure from its home regulator to withdraw.

Correct, because banks withdraw from lucrative operations due to "social pressure", not because they know full well some legal arm is about to crush an existing arrangement with elements of criminality. While we are delighted that Mr. Gizard will disagree, we are confident that after August 14 the price discovery model, while certainly not free from manipulation, most certainly originating from the BIS' Basel Offices, will be a far better one.

One can only hope that in the future all vestiges of gold and silver manipulation will eventually disappear resulting in what may be the first real price discovery of precious metals, absent central and commercial bank manipulation. 

It is the same FT that we go to for some additional color on today's stunning outcome:

It was born in the late 19th century when a handful of London bullion dealers agreed to meet daily under a cloud of cigar smoke to set the price for the “devil’s metal”. But now, after 117 years of operation, the London silver fix – the global benchmark for the metal – is on its deathbed.

 

The three banks that run the auction announced on Wednesday that silver prices would be “fixed” for the final time at noon on August 14. The move follows increased scrutiny by European and US regulators into precious metals price-setting following the Libor scandal and probe into possible forex market abuse.

 

Deutsche Bank last month resigned its seats on the silver and gold fixes, after failing to find buyers. That left just two members on the silver fix, HSBC and Bank of Nova Scotia.

 

Market participants said the benchmark process, which occurs via teleconference and allows miners, financial institutions and jewellers to trade silver and value their stocks and contracts, could not function properly with fewer than three members. The UK’s Financial Conduct Authority asked Deutsche Bank to stay on for an extra three months to allow for the benchmark to be wound down smoothly.

 

“Deutsche Bank has postponed its resignation from the London Silver Market Fixing from 29 April 2014 to 14 August 2014, at which point the benchmark will terminate,” the bank said in a statement on Wednesday.

In other words, the FCA - undoubtedly in conjunction with the Bank of England - pushed hard to keep the existing manipulation structure in place for three months, effectively against the will of the German regulator, and of Deutsche Bank itself which wanted to get out as soon as possible.

As for what happens after August 14, when the London Silver fix is officially gone, we can't wait to find out.

In the meantime, we are confident the existing members of the mirror fix, that of gold, will be scurrying under rocks to avoid all public exposure. We plan to spoil their plans later today when we profile just who they all are.

Finally, a reminder of what the once proud tradition of gold price fixing looked like back in the day.

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Wed, 05/14/2014 - 09:58 | 4758659 semperfi
semperfi's picture

If you think food inflation is bad wait until you see silver inflation!

Wed, 05/14/2014 - 10:00 | 4758678 MillionDollarBonus_
MillionDollarBonus_'s picture

But what if the prices of gold and silver keep falling despite this change? Will silverbugz and goldbugz admit that they were wrong? I doubt it, because that would require them to come to terms with their own incompetence and give up their dreams of becoming kings of the apocalypse.  

Wed, 05/14/2014 - 10:03 | 4758690 SafelyGraze
SafelyGraze's picture

fortunately, now that etf's are well established we no longer need the silver fix

Wed, 05/14/2014 - 10:04 | 4758703 cifo
cifo's picture

MDB, if the prices of gold and silver keep falling, a few mines will probably close for being unprofitable. The supply will fall too, and the market will take care of the rest.

Wed, 05/14/2014 - 10:07 | 4758722 Pladizow
Pladizow's picture

Comex silver will be slammed that day, so the Bankers can say, "See, you need us."

Wed, 05/14/2014 - 10:15 | 4758765 Latina Lover
Latina Lover's picture

You can be certain that the banksters already have another means for fucking us.  Perhaps they will dispense with the illusion of a free market and give us full in the face fascism.

Wed, 05/14/2014 - 10:26 | 4758774 Tao 4 the Show
Tao 4 the Show's picture

The word "fix" has multiple meanings in English. One wonders if these guys had a twisted sense of humor when they came up with the name.

"Damn, we can't make any money with all these price fluctuations. Let's FIX it!"

"If they ain't broke, let's FIX it!"

"Out of drugs, man. I need a FIX!"

(Spoken with uppity Brit accent)  "Those Americans will never do it properly. Obviously, the situation needs a London Fix."

Wed, 05/14/2014 - 10:27 | 4758825 SumTing Wong
SumTing Wong's picture

6. So does this mean I have about three months to stockpile silver before the low prices go away?

A: While we can't predict what will happen to the price of silver, you can be damned sure that we called the US Mint and the Royal Canadian Mint last week and ordered up a shitload. It got delivered yesterday, so we felt good about making the announcement today.

Wed, 05/14/2014 - 10:30 | 4758831 J S Bach
J S Bach's picture

This is all bullshit.  I'll believe the "fix" is over when silver reaches its natural 15-to-1 ratio to gold.

Wed, 05/14/2014 - 10:43 | 4758840 Pinto Currency
Pinto Currency's picture

This seems to be a key sentence:

"So far, it would appear the significant beneficiaries of BaFin’s persuasion have been the less-than-systemically important dealers in international silver markets"

Looks like the market was going aroiund the LBMA and, sniff, it was becoming irrelevant.

Watch next the platinum and palladium markets.

Small markets with no central bank inventory and with S.Africa and Russia in play, seeing real supply constraints (and likely serious physical hoarding by industrial users).

Palladium lease rates moving up smartly.

Wed, 05/14/2014 - 10:44 | 4758910 old naughty
old naughty's picture

What's with mid-August? Everyone got into habit of setting own deadlines?

Wed, 05/14/2014 - 11:29 | 4759116 knukles
knukles's picture

Why do you all think it was called "fixing" the market, FFS?
Damn good thing they don't manipulate the paper and physical markets any other ways, isn't it?

Fuck off, peasantry.

Wed, 05/14/2014 - 11:34 | 4759142 V in PA
V in PA's picture

August 8 2014 or 14-8-14 or 8-14-14 is the number of the "The Subsisting, The Guardian"

And they say the elites don't communicate with numerology.

Wed, 05/14/2014 - 12:03 | 4759288 Four chan
Four chan's picture

the london naked shorting exchange headded by chase opens that day.

now that i typed it, it sounds like a real thing...because it is mua ha ha ha

Wed, 05/14/2014 - 13:16 | 4759613 Arius
Arius's picture

 

 

BoA, Morgan Stanley and the rest of Team Desperato calling for top 1300 at 1298 ... now the picture is all coming together ... not much time left!

 

Show me some charts and I will believe you ... LOL

Wed, 05/14/2014 - 15:50 | 4760180 Save_America1st
Save_America1st's picture

Hard to tell what this will mean until we hear some speculating conversations from the experts.  I'd like to hear what Eric Sprott, Rick Rule, Max Keiser, Alisdair Macleod, Jim Willie, James Turk, Rantying Andy Hoffman, etc. etc. and the rest of the usual crew will have to say about this in the coming weeks ahead. 

But I don't put anything past the criminal Evil Empire.  I just can't see them giving this up without having some other big-time screw-job plan in the works to fuck with all of us.

I can just see silver rising steadily until about September or October to 35 or 40 and then when they think they've got as many sheep as they can all going long they're going to drop the boom on everyone with some crazy shit that'll drive silver back down to 20 again and bloody up the streets with fleeced muppets everywhere.

I dunno...proceed with caution.  Main thing is to stay the fuck outta the paper games and just keep steadily stacking phyzz like nothing has happened.  Stay the course, cost average in and stack regularly, and in the long run we won't get hurt. 

The suckers in the paper game and unfortunately the non-stackers too will be the ones wishing they had phyzz in the years to come after the SHTF.

Only once the Crimex has finally exploded can the Ewoks and the rest of us party down on Endor like it's 1999.

Wed, 05/14/2014 - 16:16 | 4760350 Manthong
Manthong's picture

Gee, guess who has been using Fed and our  “money” to drive the paper silver price/fix into the dirt and guess who has been stacking like a maniac and will profit most from the run-up..

http://goldsilverworlds.com/physical-market/jp-morgan-holds-highest-amount-of-physical-silver-in-history/

They should all be in jail or guests of honor at a necktie party.

Wed, 05/14/2014 - 16:33 | 4760405 Save_America1st
Save_America1st's picture

Yup, exacto-mundo!!!  Actually, Turd has been all over this from a very long time ago.  Always great stuff over at TFMetalsReport.com

Wed, 05/14/2014 - 16:20 | 4760369 TeamDepends
Wed, 05/14/2014 - 16:32 | 4760403 TeamDepends
Wed, 05/14/2014 - 16:34 | 4760410 TeamDepends
Wed, 05/14/2014 - 17:14 | 4760580 jimmytorpedo
jimmytorpedo's picture

Oh stop it with the music videos will you.

I'm already listening to Bob Marley.

Babylon System is the Vampire.

American pie,....sheesh!

Wed, 05/14/2014 - 13:29 | 4759675 TeamDepends
TeamDepends's picture

Well boys and girls, if this is legit we now have a drink-by date to get our houses in order.  Soaring PM prices crush the illusion of a sound dollar.  Expect fiscal false flags, prodigious propaganda, and unbridled usurpation of states rights between now and then.  Good luck to you all.  See you on the other side.

Wed, 05/14/2014 - 16:18 | 4760348 Manthong
Manthong's picture

.. don't forget the official social unrest

Wed, 05/14/2014 - 14:35 | 4759921 daveO
daveO's picture

Slowest time of year, so things don't blow up in their faces.

Wed, 05/14/2014 - 13:14 | 4759597 SWRichmond
SWRichmond's picture

+ 1.  this is just another indicator of the West's declining power.

Economic power moving east...western financial institutions becoming irrelevant.  

War is in the on deck circle.  And not a pansy-ass regional war, either.  China seems willing to let Putin lead the overt resistance.  this is typical Chinese perceived self image and role in the world.  let others do the fighting.  

Wed, 05/14/2014 - 10:33 | 4758847 kliguy38
kliguy38's picture

correct..... Plan"B" will be next for the boyz......don't worry.....they already have it ready

Wed, 05/14/2014 - 10:40 | 4758881 Pinto Currency
Pinto Currency's picture

JSB

15:1 is coming.

Silver seems to be the Achille's heel of the paper precious metals market.

It's over and the LBMA knows it.

Wed, 05/14/2014 - 10:55 | 4758960 outamyeffinway
outamyeffinway's picture

The current amount of silver coming out of the ground compared to gold would put the ratio around 8-9:1.

Wed, 05/14/2014 - 11:35 | 4759143 tmosley
tmosley's picture

The current ratio of above ground supply would be even lower than that.

Then there is the blow off top to consider when the public goes nuts trying to get in on the price explosion.

Planning to trade my silver for gold mostly above 1:1.

Wed, 05/14/2014 - 15:47 | 4760261 Save_America1st
Save_America1st's picture

the silver gold swap ratio is what I've been constantly thinking about.  I'm 99% silver and plan on being that way until the GSR/SGR (whatever) comes back down to Earth.  But what I'm concerned with is will there be any gold to swap for the next time the ratio gets down towards 30:1, 20:1, 15:1, or lower?

Maybe "price-wise" the ratio will be at those levels, but will anybody trade their gold for silver at that point without adding a hefty "trade premium" over many more ounces of silver to sweeten the deal.

Why will anyone want silver for gold once the ratio starts getting that low?  Will it be because they think there's still a lot more higher prices from whatever it's at from that point going forward and so they want to gain more silver?

Will they trade because they just don't want gold anymore at that point? 

I just wonder if I shouldn't wait that long if/when those ratios ever happen.  I'm thinking I might start trading for gold just a little bit like cost-averaging in once we hit the low 50's to 1 ratio.  Then see if it goes a little lower and then try to swap for another ounce or two of gold.  Then wait and see if it goes lower and then try to swap again for another few ounces, etc. etc.

I'd like to eventually even things out and be closer to 50/50 silver to gold at some point.  But I'm just concerned as to whether America will have much gold left to swap for which will then blow the ratio apart and spread it wider again as more people will have stocked up on silver now than gold which will cause an imbalance in the phyzz ratio within America's borders. 

I'm also a bit concerned that the Evil Empire will one day let gold scream higher but at the same time they will "cap" silver at like 50 bucks by stating some kind of national security emergency given that silver is used industrially, medically, etc. 

That would seriously screw over those of us currently maxed out with all silver and very little gold.  We would never see silver's real valuation potential and be stuck at a certain level while gold goes off the charts.  We'd be forced to trade all our silver for just a little bit of gold and we'd be totally screwed. 

That's another reason why I'm thinking of swapping earlier at higher ratios just in case something fucked up like this gets pulled on us.  That way I'll at least have more gold ounces than if I tried to wait for ratios down under 30:1, 20:1, etc.

Any thoughts on this?  Am I not thinking the right way about this?  It's been bugging the hell outta me lately.

Wed, 05/14/2014 - 15:57 | 4760301 tmosley
tmosley's picture

You absolutely MUST cost average out of your position, or you will almost certainly miss the whole move either by being too early or too late.

And yes, there will be gold for those who have silver.  The silver will be in great demand by the industrial users and the bubble chasers during the blow off top.  Not everyone will be making the silver->gold trade, so I think those who will will find ample gold for their silver.  Most silver owners think silver is an end in and of itself, rather than recognizing that gold is the best money they could own, and that everything, including silver should be denominated in that, and nothing else.

Wed, 05/14/2014 - 17:18 | 4760600 jimmytorpedo
jimmytorpedo's picture

When I run out of tire weights I'm turning my silver into lead.

Babylon System is the Vampire.

Wed, 05/14/2014 - 18:42 | 4760880 Save_America1st
Save_America1st's picture

@tmosley  (aren't you a Turdite like me?) :)

When you say I must cost average out of my position...just want to see if I understand you.  Are you saying that my hunch is right and my plan to swap out some Ag for gold the way I said above would be the way to go so that I can get myself to around a 50/50 holding? 

Wed, 05/14/2014 - 12:41 | 4759476 Citxmech
Citxmech's picture

Just listened to a pretty good interview with Sprott on King World News and he called it at 11:1.  Regardless - lots of headroom to explore in silver.

Thu, 05/15/2014 - 06:59 | 4761866 zilver
zilver's picture

I red an article about de gold / silver ratio sales is at 1/37 (total in 2013). They compared the sales of the most popular silver and gold coins. So Maple Leaf Gold vs silver Eagle. http://thebullionhouse.nl/zilver-prijs/verkoop-zilveren-eagles-mei-zeer-sterk-silver-fixing-london-exit/ 

 

Wed, 05/14/2014 - 10:50 | 4758942 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Yes and when these ratio pegs are enforced then you only need to fix one of the two to rig both when it comes to pricing. Price and value are not one and the same. I consider silver a lot more valuable overall than gold. Each has it's pluses and minuses but silver is a more versatile metal overall when you factor in non monetary considerations.

Wed, 05/14/2014 - 13:58 | 4759790 Carpenter1
Carpenter1's picture

It's over when the top management of every TBTF is hanging from lamposts in every city in North America and Europe

Wed, 05/14/2014 - 14:44 | 4759949 Antifaschistische
Antifaschistische's picture

Understanding market mechanisms is not what I do for a living.   However, I've been a fan of collecting metals every since my father took me to the Coin Shop with my first Paper Route profit.

As much as I like dreaming of $200 silver and $5k gold....why does "fixing" or "manipulation" (which I strongly believe in) mean the natural price should be MUCH higher?

If someone said the Hedge Funds were manipulating the price of Apple (which I believe they do) wouldn't they be manipulating it higher?

Why does metal manipulation/fixing mean the otherwise natural equilibrium price should be significantly higher than today's "market" price?

I'm not suggesting I think the price will drop.  I have no clue...like I said, I don't understand all these mechanisms....but I don't automatically assume manipulation equals market price depression.

Wed, 05/14/2014 - 17:09 | 4760566 Al Gorerhythm
Al Gorerhythm's picture

Why? Think derivitives. There will be BIGtime losers who are tied to those things; the guys on the other side of the physical obligations they purport to be able to deliver.

Wed, 05/14/2014 - 10:31 | 4758836 Pinto Currency
Pinto Currency's picture

-

Wed, 05/14/2014 - 10:31 | 4758841 BaBaBouy
BaBaBouy's picture

WELCOME The NEW SILVER Fix................ Mr. HFT...

Wed, 05/14/2014 - 10:38 | 4758827 BaBaBouy
BaBaBouy's picture

.

Wed, 05/14/2014 - 12:49 | 4759516 americanspirit
americanspirit's picture

And Tao 4, let's not forget "I was just fixin' to do that."

Wed, 05/14/2014 - 10:41 | 4758889 Greenskeeper_Carl
Greenskeeper_Carl's picture

They already have it. None of what this article says mentions dumping millions of ounces worth of silver futures contracts during thin trading times, forcing the price down. I like the sentiment, but I don't foresee this making that much of a difference.

Wed, 05/14/2014 - 14:40 | 4759935 daveO
daveO's picture

Right. Heavy shorting around 8/14. Bottom about 2 wks. later, on Labor Day. 

Wed, 05/14/2014 - 16:43 | 4760453 JLee2027
JLee2027's picture

You can be certain that the banksters already have another means for fucking us. 

I agree. It's only a cosmetic change for the appearance of removing the rigging.

Wed, 05/14/2014 - 13:26 | 4759658 hedgelessWhoresMan
hedgelessWhoresMan's picture

MDB doesn't give a $hit about the truth.

Wed, 05/14/2014 - 10:08 | 4758727 MillionDollarBonus_
MillionDollarBonus_'s picture

See? There's always a reason why silverbugz' ghastly trading performance is someone else's fault. No how much the regulators attempt to satisfy every whim of the paranoid silverbugz, there is always 'manipulation' unless the market is going in their preferred direction.

Wed, 05/14/2014 - 10:11 | 4758742 Bay of Pigs
Bay of Pigs's picture

lmao...

Thanks Tyler. LOVE this sock puppet.


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