There have been a number of mostly under the radar developments in the silver market over the past few days.
There are a couple of videos worth watching plus a couple of articles that are worth reading as well. We’ve summarized them below.
The bottom line seems to be that the shackles are slowly being released from the heavily controlled silver price.
First up a short video from Bix Weir covering the news that the two controlling participants in the LBMA silver price benchmark have both pulled out without giving a reason why.
Bix covers how:
The only physical silver market in the world will no longer function.
But why did Reuters and CME Group both bail out? The report gives no mention.
The LBMA was the excuse used every time there was a silver investigation. As the Comex futures price matched the LBMA’s physical market price. So it was argued there could be no manipulation going on.
Bix believes no one will want to take CME and Reuters place as it is just “too hot a seat”.
Three of the banks also involved in the LBMA price benchmark were named in the Deutsche Bank silver rigging admissions.
He finally explains why he believes the Comex will eventually shut down.
Then Bix Weir is interviewed on this same topic and more by Realist News.
They discuss how the Silver fix has changed over the past few years.
From a teleconference deciding on the price to an electronic “Benchmark Silver Price”.
But now the European Union has made a set of regulations that stipulate that a derivative benchmark price can not be used to set the price of a physical commodity.
So Bix Weir believes this has caused the CME and Reuters, who were the two parties that ran the LBMA silver price benchmark, to pull out of the benchmark auction.
Note: The news article from reuters is seriously lacking in detail. It gives no reason as to why the two parties are stepping down:
They also discuss:
How Ted Butler has identified that there may have been a seachange in the Comex silver market and how this has resulted in lessened movements in the silver price lately.
How the language and “narrative” around silver on the internet seems to have changed recently.
How the LBMA is the only physical exchange in the world. China only has a physical exchange for gold and the Comex is a futures market.
Why we should take this as a sign that the electronic exchange system for silver is breaking down.
Here is the article by Ted Butler that Bix discusses in the interview above. It is lengthy and detailed, but worth reading to get your head around.
Butlers analysis sheds more light on the changing dynamics at the COMEX as the traditional silver shorting “Technical Funds” are not “taking the bait anymore”.
That is, they are no longer shorting after the price plunges as they know “they were being played.” That only leaves the Large Bullion Banks to take the short side. And only JP Morgan has prepared themselves for this reality by taking delivery of over 550M oz of physical silver.
Bix Weir says:
“Make no mistake, the decades long Silver Price Suppression has created the largest Coiled Spring in the history of investing and when released Silver Investors with physical in their own possession will be the newest millionaires/billionaires strolling into a new monetary future.”
However don’t expect this to happen overnight. But perhaps these recent actions in the silver markets are signs that this price control might finally be starting to diminish.
A free market silver price may not be right around the corner but the shackles do seem to be being loosened.
UPDATE: Since we published this we have come across an excellent article from Ronan Manly at BullionStar. Manly does a great job of theorising why CME and Thomson Reuters may have suddenly pulled out of the LBMA silver price benchmark:
“…why such a brief and unclear statement from CME, Thomson Reuters and the LBMA? Is this European Benchmark Regulation just an excuse being thrown out to distract from other issues that might really be behind CME and Thomson Reuters stepping down.
Or perhaps CME and Thomson Reuters are aware of issues within the current administration of the LBMA Silver Price that would make it difficult to comply with the new legislation or that would make it too onerous to comply? But such rationale doesn’t make sense either because why are CME and Thomson Reuters not bailing out of the all the benchmarks that they are involved in? Furthermore, if the European Benchmark Regulation is a factor, why would any other benchmark service provider such as ICE Benchmark Administration (IBA) bother to pitch in the LBMA’s forthcoming tender process to find a replacement for Thomson Reuters and CME?
Perhaps CME and Thomson Reuters are worried about future reputation damage of being associated with the LBMA Silver Price due to some brewing scandal? Or perhaps the powerful bullion banks within the LBMA wanted to scupper any change that there will ever be wider participation or central clearing in any future version of the auction?”
Manly clearly believes it is the latter reason that is most likely as he goes on to say:
“…In summary, central clearing would allow direct participants to participate directly in the auction without the need for bi-lateral credit lines. However, the plan for central clearing was quietly dropped. The CME and Thomson Reuters have now had 32 months in which to introduce central clearing into the silver auction and it hasn’t happened. Nor will it now. The fact of the matter is that the LBMA banks do not want wider participation and they don’t want central clearing of auction trades either. These banks, which at the end of the day are just costly intermediaries, essentially want to monopolise the silver auction and prevent wider participation, and prevent true silver price discovery. Could it be the banks through their LBMA front that have sabotaged the contract with CME and Thomson Reuters so as to reset the contract and re-start another tender process that will ensure that no wider participation can ever see the light of day?
It’s also important to note that there is no way for miners and refiners to be direct participants in the auction. This is because the LBMA has designed the auction participant rules to keep out refiners and miners (and anyone else that is not a bullion bank). The rules are specifically designed so that only bullion banks can satisfy the LBMA’s Benchmark Participant criteria. See section 3.13 of the LBMA Silver Price auction methodology document accessible here.”
…The defection of CME and Thomson Reuters now provides a one-off opportunity for the global silver market to insist that the current scandal ridden current auction be scrapped and taken out of the hands of the bullion bank controlled London Bullion Market Association (LBMA). It is also an opportunity to introduce a proper silver price auction in its place that is structured to allow direct participation by hundreds of silver trading entities such as the world’s silver refiners and miners, an auction that employs central clearing to allow this wider participation, and an auction that is based on trading real physical silver and not the paper credits representing unallocated claims that the participating London bullion banks shunt around between themselves. This could help lead to real silver price discovery in the global silver market. However, the chances of this happening with the LBMA still involved in the new tender process are nil.”