Mourning the London Silver Fix; We’ll Miss You

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We lost a friend here at MetalMiner recently. After making it to an amazing 117-years-old, the London silver fix spat out its last daily price yesterday. His last words were “USD 1,309.25, EUR 980.42 and GBP 780.71 per ounce.”

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He is mourned by his equally aged and not-long-for-this-world friends, the London gold fix and the platinum and palladium fixes. The London Platinum & Palladium Fixing Company Ltd. recently said it will “shortly” start a request-for-proposals exercise for firms interested in assuming responsibility for their daily price fixes. The poorly named “fix” is a process by which the day’s starting price for precious metals are derived. The gold fix was started at the same time, and much the same way, as our pal, the Silver Fix, with origins in the coffee shops of London where a relatively small number of traders got together to agree on the starting daily market prices.

The loss of our fixies is a sign of the times, in that US investors and traders have become as litigious as a woman with hot coffee at a McDonald’s drive-thru, filing almost 20 antitrust lawsuits against the five banks involved in the London gold fix, and accusing them of colluding to manipulate the bullion price like some sort of modern day Jim Fisk. As a result, one of them, Deutsche Bank, resigned from the gold and silver fix tables back in May, setting up their eventual demise.

Traders in London

These hands are now tiny electronic hands in the new, auction-style London silver fix.

In this age of instant gratification, a bunch of bankers on a twice-daily conference call deciding prices simply appears to be too much of an insider process, despite the transparency built into the system. Electronic traders are also keen to increase the volume of trades and waiting around twice a day for spoken-word prices is, to them, as archaic as coffeehouses and beat poetry. Talk about harshing my mellow, man.

Depending on how today’s new, auction-based whiz-bang! electronic silver fix from CME Group and Thomson Reuters goes, we could see the gold fix retired by this Fall. A conference was held back in July to discuss gold fix reform by the World Gold Council. The Financial Times notes that since there is no centralized clearing for precious metals markets, the initial users of the new benchmark are expected to be the 11 market-making members of the London Bullion Market Association, which include Credit Suisse, JPMorgan, Goldman Sachs and UBS, so the same banks will still be involved in setting the prices today.

Maybe it was finally time. How many things do you know that have been around since 1897? Even the Chicago Cubs not winning the World Series streak took a break in 1907 and 1908. Victoria was Queen of England back then, and today furniture in her style can fetch six figures. There were no telephones and Nikola Tesla had just given his famous talk “On Electricity,” so our fixie friends didn’t switch to a process of bankers meeting on the telephone and later conference calls until much, much later.

The silver and gold fixes have likely seen more change in their time than any of us ever will and that’s what makes their loss such a damn shame.  My grandmother made it 96 and before she passed in 2006 and she would often tell me about the many firsts she saw as a teen in rural Pennsylvania in the 1920s. These included first car in the family, first radio, first television, first illegal drink, first house with a real floor, first legal drink. It was a string of firsts that my measly first Netscape browser and first dial-up modem will never come close to touching.

You have to add even more years to see how long the gold and silver fixes have been around. How many things do you know that happened every single business day for 117 years? Tim Russert was the longest-serving moderator of “Meet The Press” with just 16 years on the job. Today, David Gregory could barely make six. Robert “Raven” Kraft has run at least 8 miles on the sand of Miami Beach every single day since January 1, 1975. Cal Ripken played 2,632-straight baseball games, a longevity record not likely to be broken, but all of this is still chump change compared to the consistency of the gold and silver fixes. Something makes me think that 117 years from now, some other writer won’t be lamenting the loss of the new auction-based system’s streak.

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