The Phaserl


Silver fixed

by Alasdair Macleod, Gold Money:

Gold and silver continued their rise, feeding on the problems facing equities as they try to adjust to the downgrading of the US’s growth prospects.

There was an attempt yesterday to mark the gold price down from Wednesday’s rise, which persisted into this morning’s early trading.

Silver remains a narrow market, which was dramatically proven at the midday fix yesterday (Thursday). Ahead of the fix, silver was trading at $14.42, and the fix itself, which took fourteen minutes, was finally settled at $13.58.

The circumstantial evidence behind this extraordinary price behavior was there were over-the-counter market options expiring on the fix price. An unknown number of call options therefore expired worthless, having had considerable value at 11.59AM.

It is of course possible that there was a large genuine seller, but this looks like price-rigging. The LBMA has overall responsibility for the operation of the silver market, and it somewhat reluctantly agreed to modernize the market. The move of the daily fix to a new platform run jointly by CME and Thompson Reuters was meant to be an improvement on the old fix. Doubtless any manipulation of the price will have been done within the rules: after all, if you have a big seller which can push the market price down and subsequently benefit, is this not the normal cut and thrust of unregulated markets?

Those of us who value openness in markets will want this to be thoroughly investigated, as doubtless will the option-holders who lost money.

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