Study: London Silver Fix Suppresses Prices

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The best part of the London Silver Price Fixing is that it will soon disappear, a researcher at the University of Western Australia and a subject matter expert told Kitco News.

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Andrew Caminschi is the author of a newly published report that looks at the silver market and the daily price fixing process. Caminschi analyzed 14 years of silver market data and said his research shows the fix creates “statistically lower prices.”

“This study finds a 10-12 (basis point) downward bias in the intraday price of silver around the time of the fixing. This represents three times the average daily return on silver over the same period,” Caminschi wrote in his paper as one of his five key findings.

He added that the price suppression around the fix is unwound within an hour of the end of the auction style price mechanism.

Other findings he noted as a result of his research include “strong empirical evidence that price behavior of the fixing is significantly different to that of open markets instruments (spot and silver futures) trading at the same time;” as well he noted that market participants with prior knowledge of price direction have a daily average advantage of 25 basis points over uniformed traders.

The silver fix is a teleconference among several banks to set silver prices for the day. It will be ended August 15, to be replaced by a new electronic benchmark to be administered jointly by Thomson Reuters and the CME Group.

The price of US silver fell 1.3 percent on Monday, July 21 to $20.89 per ounce, making it the day’s biggest mover. The price of Indian silver changed direction with a 1.0 percent drop. After two days of improving prices, the metal finished at INR 45,885 ($760.85) per kilogram. The price of Chinese silver declined 0.7 percent to CNY 4,335 ($698.49) per kilogram, after two days of improvement. Japanese silver prices inched up 0.4 percent to JPY 679.00 ($6.70) per 10 grams.

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Weakening prices followed two days of improvement as the price of US gold bullion dropped 0.6 percent to $1,311 per ounce. The price of Chinese gold bullion closed at CNY 261.51 ($42.14) per gram. Following a couple days of improvement, prices fell by 0.4 percent. Japanese gold bullion prices rose 0.2 percent to JPY 4,272 ($42.15) per gram. The price of Indian gold bullion steadied at INR 27,980 ($463.96) per 10 grams following two-days of increases.

At $1,484 per ounce, US platinum bar fell 0.9 percent yesterday. Following a couple days of improvement, the price of Chinese platinum bar weakened by 0.3 percent. Prices closed at CNY 315.00 ($50.76) per gram. The price of Japanese platinum bar declined 0.2 percent to JPY 4,872 ($48.07) per gram.

Following two days of rising prices, the price of US palladium bar dropped 0.6 percent to $878.00 per ounce. After hitting a 30-day high of CNY 194.00 ($31.26) per gram on Thursday, July 17, the price of Chinese palladium bar fell 0.5 percent on Monday. Japanese palladium bar stayed flat at around JPY 2,875 ($28.36) per gram.

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