Tremors in the Silver Market. Headed to $100/oz?
Who Prices Precious Metals?
For years the LBMA (London Bullion Market Association) has been the source of the twice daily London silver price “fix”, which sets the price twice a day through a carefully controlled digital auction process. In general, auctions can be the most direct way of establishing a market price, but obviously only if all interested parties have a seat at the table to bid. Out of the 500-1000 parties that actively trade silver bullion on commodities markets, only 7 are allowed to bid in this critically important auction. The question then becomes – is this a true “auction” or is it collusion among the most major participants in the market?
The FTC website defines price fixing as
“…an agreement (written, verbal, or inferred from conduct) among competitors that raises, lowers, or stabilizes prices or competitive terms. Generally, the antitrust laws require that each company establish prices and other terms on its own, without agreeing with a competitor. When consumers make choices about what products and services to buy, they expect that the price has been determined freely on the basis of supply and demand, not by an agreement among competitors. When competitors agree to restrict competition, the result is often higher prices. Accordingly, price fixing is a major concern of government antitrust enforcement.
A plain agreement among competitors to fix prices is almost always illegal, (emphasis added) whether prices are fixed at a minimum, maximum, or within some range. Illegal price fixing occurs whenever two or more competitors agree to take actions that have the effect of raising, lowering or stabilizing the price of any product or service without any legitimate justification.”
To many of us in the precious metals industry, the way the LBMA silver price fix is coordinated sounds way too close to this definition of illegal price fixing. Indeed, in late 2016 Deutsche Bank agreed to a $38 million settlement in a price fixing case brought against them by precious metals investors. Perhaps not coincidentally, in early 2017 Thompson Reuters and CMA Group resigned from their position as 2 of 7 participants in the LBMA silver price fix. They were only 3 years into a 5 year contract. Could it be they saw the writing on the wall? That this type of price fixing will not stand up in court and could very well end up being very expensive for these privileged participants?
The Future of Silver's Price Movement
If silver is consistently priced below actual, real world demand - even below mining costs - as we have pointed out many times; if the price of silver doesn’t react in any reasonable way to real world market forces, it makes sense that supply is strained. The U.S. Mint is constantly selling out of silver bullion coins, and this may be precisely why.
The after-effects of the Deutsche Bank settlement are just beginning to surface. Other banks have admitted to participating in precious metals price fixing and the jig may be up soon. New, stronger legislation is just now coming into effect in Europe. There are many more lawsuits pending on these very issues.
If these back room deals can no longer hold the price of silver down to benefit the big banks, the big winner will be YOU, but only if you take advantage of these last final buying opportunities. The silver price could finally FINALLY reflect reality and become transparent. The upside potential is HUGE if you act now.
Silver is now up 10% just since mid-December. That 10% could be the beginning of silver’s huge surge up to $100 an ounce! Get on board while you still can!