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Fixing the Silver Fix : the Corruption Continues

March 31, 2016

Fixing the Silver Fix : the Corruption Continues

My name is Tommy Flanagan, and I’m a member of Pathological Liars Anonymous. In fact…I’m the president of that organization. Yeah, that’s who I am.

I didn’t always lie. No, I used to tell the truth. Then one day I told a lie, and I got away with it. Yeah, I told my parents that I had a brother that they had never met… 

-Jon-the-Liar Lovitz, The Johnny Carson Show, March 28, 1985

As the character Jon Lovitz explained on The Johnny Carson Show, lying is habit-forming. If perpetuated, it becomes compulsive conduct. Lying is a form of deviant behavior that (in the eyes of the liar) makes problems go away. Of course such problems never disappear permanently, because a lie can never solve anything. At some point the problem resurfaces, and because it never was addressed, often the problem has grown even larger.

The response from the liar is to tell another lie. But, because the problem is now almost inevitably larger, the new lie tends to be bigger or worse than the original. The process repeats. As the lies become larger and more numerous, eventually some of the new lies begin to openly contradict the old lies.

At this point, the proverbial “jig is up” for the liar. At least that is how things are supposed to work, as illustrated by the fable The Boy Who Cried Wolf. Which brings us to the “silver fix.”

The most obvious starting point is a question: why do we need a “silver fix”? In an era of electronic, instantaneous communication, and with (supposedly) “free and open markets,” why do we need someone to tell us what the price of silver is supposed to be at a particular moment in time? Why can’t market participants simply observe for themselves the current spot-price in our “free and open markets”?

…click on the above link to read the rest of the article…

They Broke the Silver Fix

February 10, 2016

THEY BROKE THE SILVER FIX

Editor’s Note: Keith is testifying today before the Arizona Senate Financial Institutions Committee on a gold legal tender bill, which he also helped draft. There is also interest in his gold bonds proposal.

Last Thursday, January 28, there was a flash crash on the price chart for silver. Here is a graph of the price action.

KeithWeiner
The Price of Silver, Jan 28 (All times GMT)

If you read more about it, you will see that there was an irregularity around the silver fix. At the time, the spot price was around $14.40. The fix was set at $13.58. This is a major deviation.

Many silver bugs are up in arms about how unfair the new silver fix is. That’s nothing new. They were up in arms about the old one. The old one was supposedly manipulated.

One thing is for sure, tactical manipulations can occur. A gold trader in London was found to have pushed the price down in the gold fixing by a few pennies. He had sold a multimillion dollar option, and he wanted it to expire worthless to avoid having to pay. Right after the fix, he bought back the gold he sold, pushing the price back up to where it was. He took a loss on the round trip of the gold, of course, but saved millions on the option which he did not have to pay.

This is not the long-sought proof that nefarious forces are keeping gold from attaining $20,000.

Anyways, because the silver and gold fixes were deemed to be benchmarks by regulatory changes post the LIBOR manipulations, a new process for the gold and silver fixes was implemented. Before we look at what changed, let’s consider why there is a fix price. Couldn’t they just take the price at 12:00 noon?

…click on the above link to read the rest of the article…

Silver Market In Disarray After Benchmark Price Fix Manipulation

January 28, 2016

Silver Market In Disarray After Benchmark Price Fix Manipulation

The LBMA Silver Price – the crucial daily benchmark used by producers and traders around the world to settle silver products and derivatives contracts – was set at $13.58 per ounce.

At the time of the auction, which begins at 12 noon London time, the spot price was at $14.42 per ounce while the futures price on the CME was at $14.415, leaving a number of market participants extremely confused as to what has happened.

“Unfortunately, it is not [a mistake],” Ole Hansen, head of commodity strategy for Saxo Bank, told FastMarkets. “This could be the end of the fix. It took 14 minutes to find a fix – they obviously found a fix way off of the market.”

The difference between the two was nearly six percent but the benchmark cannot be changed,a person familiar with proceedings told FastMarkets.

Another source also suggested that the continued existence of the fix has been put in jeopardy by the huge discrepancy in today’s price, adding that many producers – who still use the price as their daily reference – may have lost significant amounts of money if any contracts have been settled according to the fix.

“A huge number of contracts are still settled on that price,” another said. “This will no doubt cause significant problems.”

The matter is being investigated internally,FastMarkets understands, so CME has no official comment at this time.

This is how the market reacted to this clear manipulation…

As we have detailed previously, the ‘fix’ or ‘benchmark’, as it is now known, is still the global benchmark reference price used by central banks, miners, refiners, jewellers and the surrounding financial industry to settle silver-based contracts.

As Bulliondesk.com’s Ian Walker reports, the silver market was thrown into disarray on Thursday after the LBMA Silver Price was set 84 cents below the spot and futures price this morning.

…click on the above link to read the rest of the article…

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