One of the biggest providers of exchange traded funds has entered the race to develop a new global silver price benchmark when the 117-year-old London silver fix is disbanded in August.
ETF Securities, which pioneered gold-backed ETFs and oversees $19 billion in assets, said on Wednesday that it had submitted a detailed proposal to the London Bullion Market Association, and was consulting market participants.
... Dispatch continues below ...
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The UK company's move highlights the strong competition to provide a new daily reference price for silver. The London Metal Exchange -- which is the world's largest bourse for base metals futures, and has previously quoted silver prices -- is working on its own electronic alternative, as is the Chicago Mercantile Exchange, which oversees the biggest silver and gold derivatives contracts.
On Wednesday, Platts, the benchmark and information provider, confirmed that it had entered discussions as well. It said: "We have held conversations with the LBMA and we look forward to continued collaborative engagement regarding price discovery in the silver market."
Whichever organisation is chosen to run the new silver benchmark will also be in a strong position to take over the under-fire gold fix, if the group of banks that operate this benchmark decide to phase it out.
Participating in a benchmark price process would offer prestige to a company such as ETF Securities, while the exchanges would also stand to gain from transaction fees, commissions, and licensing revenue.
Graham Tuckwell, founder and chairman of the ETF Securities, said his proposed solution for silver pricing would involve the London Stock Exchange's auction platform for shares and result in physically-settled transactions.
"From talking to people in the market, I am absolutely confident that this will be benchmark accepted by the LBMA members," Mr Tuckwell said. "It offers real transparency and the infrastructure is already in place."
Under the current system, banks run an auction system by teleconference, to set a single price that is used by silver miners, jewellers, and financial institutions to trade the metal and value their inventories. However, like the gold fix, the silver benchmark has been criticised as opaque and old-fashioned and has attracted increased regulatory scrutiny following global probes of alleged manipulation of Libor and foreign exchange indices.
A decision to abandon the London silver fix from August 14 was made after Deutsche Bank failed to find a buyer for its seat on the rate-setting body earlier this year -- leaving only HSBC and Scotiabank involved.
The LBMA, the trade association for London's $1.6 trillion-a-year silver market, launched a consultation in May to come up with a revised pricing mechanism.
ETF Securities' proposed solution would be based on the company's silver fund, which is backed by physical metal and traded on the London Stock Exchange. Market participants wishing to buy or sell metal would deal using the LSE's electronic auction process, which lasts for five minutes and uses algorithms to calculate closing prices for shares at 4.30 p.m. each day. Transfer of silver bars between the buyers and sellers would occur two days later.
Mr Tuckwell said he was still in talks with the LSE about his proposal, and that he wanted the silver auction to occur at noon, in line with current practice. People familiar with the process said that Thomson Reuters has also expressed interest in offering a silver price.
The process is being closely watched by market participants elsewhere in the precious metals industry. If a new silver benchmark is seen as an improvement, it will add to calls for the 95-year-old gold fix to be scrapped.
The twice-daily gold auction process is run by four banks in London. In May the UK's Financial Conduct Authority fined Barclays, one of the four fixing members, L26 million for poor controls after one of its traders used the auction to push down the gold price in order to avoid paying out on a derivatives contract. * * *
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It's like Money Morning Global Resources Specialist Peter Krauth has been saying: A low silver price doesn't scare away investors; it draws them in.
As silver prices slumped 36% in 2013, retail investors took advantage of the dips and sent physical silver demand up 13% to an all-time high, according to World Silver Survey 2014.
The silver price was modestly higher Friday amid mounting geopolitical tensions that have stoked bullish options activity.
In early afternoon trading, spot silver was last up $0.03, or 0.15%, at 19.78 an ounce. The metal traded as low as $19.57 and as high as $19.92 in another volatile session.
Silver prices spiked some 2%, or $0.51, to $20.49 an ounce intraday Thursday before closing the session up $0.37 to $20.14 an ounce. The gains came as the U.S. stock markets sold off sharply. Stocks sank even after the Labor Department reported U.S. weekly jobless claims dropped to a seven-year low, a sign of ongoing recovery in the labor market and the economy.
Spot silver prices rose $0.07, or 0.4%, to $19.86 an ounce midday Monday as precious metal traders and investors gear up for a busy week ahead.
Market participants remain guarded, with a spate of U.S. economic data flooding in as the week wears on. Capping the busy week will be Friday's closely watched March jobs report.
Meanwhile, Monday caps the end of 2014's first quarter.
Amid frenzied demand to buy and store silver, a Singapore retail supplier of coins and bars opened a new 600-metric-ton vault on Monday.
The sizable Silver Bullion Pte. Ltd. storage facility can hold some $390 million worth of silver (at Friday's prices of $20.33 per ounce). Known as The Safe House, the new facility is located west of Changi International Airport. At present, it keeps some 37 tons of silver, mostly for its retail clients, behind a secure 2.5-ton stainless door.
Silver prices today (Friday) were modestly higher as bargain hunters stepped up to buy the dips. In early trading, spot silver last traded up $0.11 to $20.45.
It's been a volatile and punishing week for silver.
In morning trading Thursday, silver futures for May delivery slumped 2.3% to $20.355 an ounce, on pace for the biggest drop since March 7.
Buoyed in early trading by a flight to safety amid simmering turmoil between Ukraine and Russia, silver prices today are showing signs of life.
In morning trading Friday, the price of silver rose $0.62, or 2.44%, at $21.89 an ounce. While the white metal slipped $0.148 Thursday to finish the session at $21.25 an ounce, the dip came on mild profit taking. Silver had a stellar showing Wednesday, ending up 2.66%, or $0.55, at $21.33.
Despite lower silver prices, Vancouver's Pan American Silver Corp. (Nasdaq: PAAS) reported strong earnings yesterday (Thursday) that sent its shares soaring 6.28% over the day - and up to an 8.35% gain through Friday.
At first glance, Pan American's story may appear grim. In 2013, silver prices fell 35.7%, and Pan American shares fell right alongside, for a remarkably similar 35.57% loss across the year.
The precious metal started out the year at $31, and ended at $19.50, continuing an overall slump dating back roughly to mid-2011.
That, however, obscures a massive run, like gold, that silver embarked on in 2001 when it was near $4, eventually topping out around $49 in April 2011. At its peak it generated a return of 1,091%.
Precious Metals News: Silver prices today could slip if the December jobs report comes in higher than expected.
Silver prices traded in tight range Thursday ending the day a touch higher, up $0.076, or 0.31%, at $19.61 an ounce. But the price of silver fell Wednesday after strong ADP data. The ADP report showed 238,000 jobs were added in December, above the 200,000 expected. The U.S. dollar index edged higher following the ADP report, and metals were clipped.
We all have our reasons for following Apple. I track it because this tech behemoth is a massive global consumer of metals - base, rare earth, and precious.
And right now, Apple is giving us some surprising indications that the demand for silver is much higher than its current price would have us believe.
Precious metals were mixed in May as were sales of US Mint bullion coins
Gold prices declined for a fifth straight session to end at a new four-month low, sinking 3.5% for the week and 3.9% for the month.
Gold for August delivery on Friday dropped $11.10, or 0.9%, to settle at $1,246 an ounce on the Comex division of the New York Mercantile Exchange. The settlement price was the lowest since gold closed at $1,239.80 an ounce on Jan. 31.
"Gold has been trading in a compressing range since March with prices being supported by geopolitics, while the broad strength in stocks has kept pressure on precious metals," MarketWatch quoted Tyler Richey, an analyst for the 7:00′s Report, which offers daily markets commentary.
"This week, it was a combination of the Ukrainian elections going smoothly as well as the break to new all-time highs in the S&P [500] that sent gold futures plummeting to lows not seen since early February," he said. "Going forward, inflation remains the key catalyst and although there are signs that inflation is bottoming (not only domestically but globally), it's not going to be enough to initiate a gold rally just yet."
Gold's 3.9% monthly loss was the worst of the year. Gold prices gained 0.9% in April, fell 2.9% in March, surged 6.6% in February, and jumped 3.1% in January. Gold has increased $43.70, or 3.6%, since ending 2013 at $1,202.30 an ounce.
Gold Outlook
Majority participants in the latest Kitco News survey are bearish about gold prices next week. Eighteen participants expect prices to trade lower, 7 see prices rising and 2 see prices trading sideways or are neutral. Kitco News reports that:
"Those who see weaker prices continuing say now that gold fell through the technical-chart wedge formation, further losses are possible… Those who see prices rising next week said gold could see a bounce after such a sharp break… Those who see prices sideways or are neutral say gold prices may try to stabilize after this week's selloff."
Participants were divided in last week's survey by Kitco.
Silver, Platinum and Palladium Futures
Silver also extended its losing streak to five sessions, and plummeted 3.8% for the week and 2.6% for the month. On Friday, silver for July delivery lost 33 cents, or 1.8%, to close at $18.68 an ounce.
Silver prices turned down on the year as a result of this week's declines. The white metal is off 3.6% from the 2013 close of $19.37 an ounce.
PGM futures split on Friday and for the week but climbed in May. In the Friday and weekly breakdowns:
July platinum shed $7.40, or 0.5%, to $1,452.70 an ounce, falling 1.4% from a week ago.
Palladium for September delivery added $1.85, or 0.2%, to $836.35 an ounce, gaining 0.6% from a week ago.
In May, gains tallied to 1.7% for platinum and 2.9% for palladium. For the year so far, platinum has jumped 5.7% and palladium has soared 16.4%.
Gold slipped $4.50, or 0.4%, to $1,250.50 an ounce,
Silver rose 15 cents, or 0.8%, to $19 an ounce,
Platinum gained $17, or 1.2%, to $1,464 an ounce, and
Palladium added $6, or 0.7%, to $836 an ounce
For the week, palladium climbed 1% while the other metals registered declines of 3.2% for gold, 2.2% for silver and 1.3% for platinum. Monthly gains totaled 2.8% for platinum and 4.1% for palladium while monthly losses tagged in at 2.9% for gold and 1.5% for silver.
US Mint Bullion Sales in May
While U.S. Mint bullion figures for May are not likely to change, the bureau has not officially closed the month out. CoinNews.net will later publish a more detailed analysis but as the numbers stand now:
American Eagle gold coins gained 35,500 ounces after sales of 38,500 ounces in April. Sales for the year so far are at 217,500 ounces, well lower than last year's five-month total of 572,000 ounces.
2014 American Eagle silver coins rose 3,988,500 in May compared to 3,569,000 in April. Silver Eagle sales for the year have been rationed by the U.S. Mint and stand at 21,436,500, for the second quickest pace for a year through May 30. Last year holds the record for the period, barely, at 21,768,500. Sales of the silver coins slowed sharply in the last two weeks. In related coin news, on Friday the U.S. Mint announced that it was no longer allocating Silver Eagle sales. U.S. Mint distributors can begin ordering as many as they want beginning on Monday.
American Buffalo gold coins gained 12,500 compared to 17,500 in April. The monthly total is the third highest this year.
2014 America the Beautiful Five Ounce Silver Bullion Coins advanced 23,100 after gaining 10,600 in April. Most of the increase came from sales of the Shenandoah coin that launched on May 5, 2014.
American Platinum Eagle coins climbed 1,000 in May after rising 1,200 in April. The platinum coin is in its 12th full week of release following a five-year hiatus.
Below is a sales breakdown of U.S. Mint bullion products with columns listing the number of bullion coins sold on Friday, last week, this week, last month, in May, and the year-to-date.
American Eagle and Buffalo Bullion Sales (# of coins)
Friday Sales
Sales Last Week
Weekly Sales
April Sales
May Sales
YTD Sales
$100 American Platinum Eagle Bullion Coins
0
300
0
1,200
1,000
12,200
$50 American Gold Eagle Bullion Coins
500
11,000
6,500
26,000
29,000
155,500
$25 American Gold Eagle Bullion Coins
0
0
0
5,000
3,000
25,000
$10 American Gold Eagle Bullion Coins
0
0
0
20,000
6,000
68,000
$5 American Gold Eagle Bullion Coins
5,000
10,000
5,000
55,000
35,000
325,000
$50 American Buffalo Gold Bullion Coins
1,000
3,000
3,500
17,500
12,500
95,500
$1 American Silver Eagle Bullion Coins
125,000
300,000
426,500
3,569,000
3,988,500
21,436,500
Great Smoky Mountains National Park 5 Oz Silver Bullion Coins
0
500
0
10,600
4,000
27,000
Shenandoah National Park 5 Oz Silver Bullion Coins
Just three years ago it launched itself majestically towards the $50 mark like a rocket-powered astronaut.
Ever since it's been lurching about like a directionless drunk.
Now – and not for the first time – it's staring over the precipice at $18.
The question is – it is going to topple over?
Silver – a great investment story, but never quite delivers
Silver investors are a funny bunch. Just as silver is 'gold on steroids', so silver investors are 'gold bugs on steroids'.
Unlike namby-pamby gold buyers, who've sold off their gold exchange traded fund (ETF) hoardings – NYSE:GLD – by 40%, silver investors hold on and tough it out. The equivalent silver ETF has seen outflows of little more than 10%. They're more committed.
Many are patriotic Americans who remember the old silver dollar with affection. Money was honest then. An ounce of silver for a day's work. They believe in their metal. It's just a matter of patience. Time will out.
They point to the fact that silver, historically, is money. That it means money in some 90 or more languages – shekel in Hebrew, argent in French, plata in Spanish. They point to the fragility of the current financial system and say the answer lies in hard currency.
Then they play their other trump card. Silver is finding more and more uses: as the world computerises itself, it will need endless silver. New discoveries are being made all the time about its ability to combat infection, odour, fungi, bacteria – the undead, even – so it's finding more and more applications in medicine, biotech and clothing. The world needs more silver.
Then they play a third trump card. There's a massive short position in silver on the futures exchanges – it amounts to more than annual global production. That silver cannot be delivered. Sooner or later, we'll get the mother of all short squeezes and silver is going to go to the moon.
There's a fourth trump card. Large silver discoveries are a thing of the past. Most silver occurs with lead and zinc, but investment in lead and zinc mining has gone the same way as Nick Clegg's popularity. All sorts of shortfalls in both base metals are projected in the not-too-distant future. The same should also apply to silver.
And there's even a fifth trump card. There is about 16 times more silver in the earth's crust than there is gold, but gold is currently around 70 times more expensive than silver. If their prices moved to reflect their relative scarcity (as has been the case in the rather distant past), and the gold price remained unchanged, then silver would be nearly $80 an ounce.
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There's even more to it than that. Pretty much all the gold that has ever been mined still exists, but the silver has been consumed. So silver – say its most extreme believers – could actually go to parity!
Like the irresistible salesman with the shiny white teeth, like the adverts for EuroMillions, silver promises riches beyond the dreams of avarice – but it rarely delivers. And the silver investor walks away shaking his head wearily, incredulously, like the England player who's just missed a penalty.
Silver is at risk of plunging another 20%
As I'm fond of saying, the more times a price tests a level, the more likely it is to go through it.
Over the last 12 months, silver has tested the $18-19 area time after time. It can only take so many tests. If it breaks down below, we'll fall another 20% to $14 or $15 before you know it.
The key area is the red zone in the chart below, which shows silver since 2010.
That would be painful for silver investors.
On the other hand, if silver can manage to meander sideways over the summer months, then it will actually get through that large blue trend line I have drawn off the April 2011 high. That will be some small solace to silver investors.
So what looks most likely?
You would expect to see a bigger washout before the market makes its final low. ETF holdings show that the diehard bunch that are silver investors are holding on still. Perhaps a fall to $14 would see that wash-out.
For now though, it's all about the $18 level. The big positive is that June is the weakest month in the year for silver. Professional traders look for a June low to buy that silver. Perhaps the low for the year is what we're seeing at the moment.
I know the chief executive of one large silver mining company stops selling his silver in June for this very reason. If he can, he'll do his selling earlier in the year and later.
Silver's time will come again – of that I'm sure. The story is too good for it not to. But we may have to wait quite a while. If there's one thing silver likes to do, it's frustrate. And short-term traders in particular should keep an eye on that $18 mark.
Silver's time will come 
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