For the past 117 years, silver price has never been on a truly free market. The price has always been fixed by 3 players: Deutsche Bank, HSBC and Bank of Nova Scotia.
The London silver fix is currently set by three banks over the phone at noon in London. It’s used by the entire silver market, including the Canadian mint, precious metal miners, jewelers, your local silver dealers and of course investors like us.
The price fix is based on deals between their clients and obviously did not take you (a retail investor) into consideration.
However, situation will change in August 2014 because Deutsche Bank is going to withdraw from such practice. This will leave HSBC and Bank of Nova Scotia to be the remaining player to “play” with silver price.
It takes a lot of funding to manipulate silver price. Without financial resources from Deutsche Bank, the remaining 2 banks find it unsustainable to continue fixing silver price.
Deutsche Bank started pulled the plug on its global commodities trading business since December 2013. They cut 200 jobs and it becomes the first major bank to exit the once lucrative sector due to toughening regulations and diminished profits.
Deutsche Bank did not completely stop their activity on silver in December 2013. The bank resigned in April from its gold and silver fixing seats. Their silver price fix activity will only completed stopped in 14th August 2014.
What is the impact after August 2014? Silver market is not going to collapse. silver price will face a market-led adjustment. There will be more uncertainty. But that also means a more transparent silver price driven by demand and supply. The fundamentals of silver has become more important than before. Watch this video to learn more about the fundamentals of silver
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