What Will the New Silver Price Electronic Exchange Mean to the Precious Metals Market?
For a long time organizations such as GATA.org, those involved in the precious metals industry as dealers and resellers have claimed that there is price fixing in the precious metals markets. Some have claimed that the big banks and the Federal Reserve have done a tremendous amount of “naked shorting” to suppress their true worth.
As with any claim or concerns about price-fixing, lawsuits are occurring. Apparently the current system has lost some credibility and has become a liability.
The London Metals Exchange now announces a new set-up, a silver price electronic exchange, starting in August for the selling of silver. Apparently it is trying to address these concerns. (see article below)
So the question becomes what will that do to the price of silver? If there is a new market for trading will that cause silver prices to increase? Will prices become more volatile or like a roller coaster ride? What impact will this have on other precious metals? These are just a few of the questions I have.
I do not have a degree in finance, business, or economics although I do teach business law to MBA students. So I am a layman, just like you, who reads, observes and looks for patterns.
What I am trying to determine is when the price of precious metal rise, is there an inverse relationship to the health of the dollar? If there is, then obviously when the price of precious metals elevate one should be concerned about the viability of the U.S. Dollar and other currencies. Another question I am mulling is whether a rise in precious metals is more of an accurate indicator of the true rate of inflation instead of our government statistics? Since the Clinton Administration changed the formula for inflation accounting many say that the real rate of inflation is underreported. See John Williams’s website www.shadowstats.com for more information.
For those interested in this topic see the announcement below:
UPDATE 2-CME, Thomson Reuters win battle to replace century-old silver benchmark
(Writes through with quotes, background)
* LBMA settles on silver fix replacement after 2-month hunt
* New mechanism heralds change in precious metals benchmarks
By Clara Denina and Jan Harvey
LONDON, July 11 (Reuters) – CME Group and Thomson Reuters will operate an electronic silver benchmark when the 117-year-old “fix” is disbanded in August, in a move widely seen preceding sweeping reforms of precious metals price-setting.
The London Bullion Market Association (LBMA) said in a statement on Friday that CME Group will provide a price platform and methodology for the daily process, while Thomson Reuters is responsible for administration and governance.
CME/Thomson Reuters will start testing the new process in early August after the closely contested competition to produce a solution.
The silver fix – used by producers, consumers and investors – is set every day at noon by three banks via a conference call, working out a price at which their customers are willing to buy and sell the metal.
But with increased attention from regulators in the wake of benchmark manipulation in other markets, the current operator – London Silver Market Fixing Ltd – said in May it would stop running the daily call.
The LBMA consulted market participants with the aim of producing a transparent electronic alternative that complies with toughened regulatory benchmarking standards.