The London Silver Fix is a daily price benchmark for the spot silver market that has been in place for 117 years. On August 14, 2014, the London Silver Fix will come to an end. The company that currently runs the silver benchmarking process known as the London silver fix, is London Silver Fixing Limited. The “fix” occurs at noon, London time, during a conference call between Deutsche Bank, HSBC and the Bank of Nova Scotia. During the call, the banks compare bids and offers for silver on behalf of themselves and their clients, and then they declare the price ‘fixed’ when supply and demand reaches an equilibrium at a certain price. In other words, a few representatives from three banks determine the price of silver on a daily basis.
Although spot silver is traded 24 hours a day, the daily fix provides price guidance that big players can use to make big deals. Some traders prefer the volatility of the silver spot price, while larger organizations, such as miners and industries that buy and sell in large volumes, prefer to complete their deals on a set daily price.
In April, Deutsche Bank resigned from the London Silver Fix panel and another similar panel that sets the benchmark price of gold, so only HSBC and the Bank of Nova Scotia remained. Because of this and all the bad press that has been circulating about precious-metal price manipulation and price fixing, the remaining banks decided to resign from the panel as well.
What happens after the London Silver Fix ends?
Nobody really knows what will happen after August 14; however, if a new system is not established, buyers and sellers will probably just use the spot silver price, or another daily benchmark such as the silver-futures closing price on the US COMEX exchange. Hopefully, the closing of the London Silver Fix will bring us closer to true price discovery in the silver markets. That’s what I’m hoping for anyway.