does intra-bank and LBMA trading affect PM prices?

[Spartacus]

I would guess that it does not.

say $10B is to be traded - the 2 banks in question say

"right, now, that amounts to xxx ounces of Silver, so on LMBA we'll switch bookkeeping entries representing ownership of xxx ounces and call the $10B transfer done."

I'm having a hard time seeing how this could affect the Silver price for example on COMEX.

This question arises for me because a few commentators (Paul Van Eeden & Antal Fekete among others) claim this type of transfer is what has been raising prices over the last couple of years, as more of these transfers are done in PMs instead of US dollars.

comments?

[Finster]

Re: does intra-bank and LBMA trading affect PM prices?

I would guess that it does not.

say $10B is to be traded - the 2 banks in question say

"right, now, that amounts to xxx ounces of Silver, so on LMBA we'll switch bookkeeping entries representing ownership of xxx ounces and call the $10B transfer done."

I'm having a hard time seeing how this could affect the Silver price for example on COMEX.

This question arises for me because a few commentators (Paul Van Eeden & Antal Fekete among others) claim this type of transfer is what has been raising prices over the last couple of years, as more of these transfers are done in PMs instead of US dollars.

comments?

Remember the "price" of a PM is nothing more than the 'exchange rate' between the PM and the currency. In considering whether the actions of banks are changing the price of PM's, why do we not instead to ask whether the banks are changing the "price" of the currency?

Is it just sheer force of habit that we express value of PMs in terms of fiat currency rather than the other way around?

Are the banks really affecting the value of the PMs or are they affecting the value of their currency?

[Jim Nickerson]

Re: does intra-bank and LBMA trading affect PM prices?

Remember the "price" of a PM is nothing more than the 'exchange rate' between the PM and the currency. In considering whether the actions of banks are changing the price of PM's, why do we not instead to ask whether the banks are changing the "price" of the currency?

Is it just sheer force of habit that we express value of PMs in terms of fiat currency rather than the other way around?

Are the banks really affecting the value of the PMs or are they affecting the value of their currency?

Finster,

I have no doubt that someday you're going to succeed with getting iTulipers to see this the way it is. Keep persevering.

[jk]

Re: does intra-bank and LBMA trading affect PM prices?

finster has succeeded to a degree. yesterday, while the market was dropping, i had the thought that my dollars were getting more valuable. on the other hand, i don't see how his observation helps answer spartacus' question.

[Sapiens]

Re: does intra-bank and LBMA trading affect PM prices?

finster has succeeded to a degree. yesterday, while the market was dropping, i had the thought that my dollars were getting more valuable. on the other hand, i don't see how his observation helps answer spartacus' question.

How was that so? Did the money stock shrink?

-Sapiens

[Sapiens]

Re: does intra-bank and LBMA trading affect PM prices?

Is it just sheer force of habit that we express value of PMs in terms of fiat currency rather than the other way around?

No, it's a matter of liquidity and legal tender laws.

If you could easily and readily pay with PMs at your local delicatessen or goods store, then it would not be an issue. But the government by “demonetizing” PMs and turning them into “commodities” removes the facility and virtue of being ready cash, in the eyes of the general public.

-Sapiens

[metalman]

Re: does intra-bank and LBMA trading affect PM prices?

had another thought on gold falling together with stocks yesterday...

for a while now the talk has been of a high level of correlation among assets, even those which are usually inversely correlated. it's been "all assets up," leading observers to note believe that all assets are now correlated to "liquidity" meaning the credit markets. yesterday's action gave evidence that a sharp "ka" will bring down everything, just as a slow one in housing is bringing down housing. really, yesterday's action is making me think hard about trading "ka-poom" and cutting my metals position in half. but i worry that when the fed jumps in again to "fix" the problem (the one they created?), i might find myself behind the curve buying back in again. hmmmm.....

[Finster]

Re: does intra-bank and LBMA trading affect PM prices?

finster has succeeded to a degree. yesterday, while the market was dropping, i had the thought that my dollars were getting more valuable. on the other hand, i don't see how his observation helps answer spartacus' question.

I'll take whatever small victories I can get ... ;)

As for Spartacus's question, people regularly claim that CBs influence prices, not least those of gold and silver. Gold and silver bugs tirelessly accuse them of manipulating the value of gold and silver. It may seem self-contradictory, but I agree with the first statement and not the second.

The difference is in asking when the exchange ratio of dollars and gold is being affected, whether it is primarily the value of the dollars or the gold that is changed. In the short run, the question is academic. Longer term, it's unequivocally that of the dollars. Over time, gold has held its value much more reliably than any fiat currency.

Thus, if gold bugs are accusing the Feds of manipulating the gold price down, I say no, they are supporting the dollar.

[Finster]

Re: does intra-bank and LBMA trading affect PM prices?

No, it's a matter of liquidity and legal tender laws.

If you could easily and readily pay with PMs at your local delicatessen or goods store, then it would not be an issue. But the government by “demonetizing” PMs and turning them into “commodities” removes the facility and virtue of being ready cash, in the eyes of the general public.

-Sapiens

An ephemeral point at best. One dollar will buy you far less at your local delicatessen or goods store than it did thirty years ago. One ounce of gold will buy you about the same.

[Finster]

Re: does intra-bank and LBMA trading affect PM prices?

How was that so? Did the money stock shrink?

I'll defer to Bart on the question of the size of the money supply. But you're overlooking something else equally important - money demand.

We learn in Econ 101 that values and prices are set by supply and demand. But for some reason, whenever questions about the value of the currency arise, we act as if the latter doesn't even exist.

[metalman]

Re: does intra-bank and LBMA trading affect PM prices?

An ephemeral point at best. One dollar will buy you far less at your local delicatessen or goods store than it did thirty years ago. One ounce of gold will buy you about the same.

been a very long time since anyone bought anything in a store with gold, and ...this is a nit... no one ever bought anything at a deli with it. silver, certainly, but never gold. gold-backed paper, yes. and this is the point, to me. one could convert paper currency to gold and back again at the bank, now only at a coin dealer, ETF, etc. the purpose was to allow the markets to determine interest rates, because the act of millions deciding to either demand gold for their cash when they sensed that the banks were lending too freely or for paper for gold when lending not freely enough determined the banks' reserves, the money supply, and interest rates. that's what we really lost when we went off the gold standard, as Antal E. Fekete explains...

Bond speculation is the heel of Achilles for the regime of irredeemable currency, that will cause its self-destruction in due course. Like an incubus, it sucks all the economic resources of the world, and robs it of the best talent. The tricksters who grabbed the gold belonging to the people of the United States and its foreign creditors were unaware that their looting would let the genie of destruction, bond speculation, out of the bottle. How can we explain this colossal oversight?

Interest rates were stable under the gold standard, and the small variation in bond prices did not admit a profitable opportunity to speculate in bonds. But bond speculation started as soon as the gold anchor was cut in 1971, on the dot. The "brain trust" of apologists for irredeemable currency can develop theories about bond speculation, suggesting that it has a stabilizing influence on interest rates, just as commodity speculation has on the prices of agricultural goods. Let us bypass, for the sake of argument, the fact that this stabilization was automatic under the gold standard. Any effort to prove that speculation has an analogous stabilizing influence in both the commodity and the bond market is doomed to failure. It ignores the fact that the supply of bonds is controlled by man, in contrast with that of agricultural goods which is controlled by nature. The analogy is flawed beyond the hope of repair. Commodity speculation is self-limiting. It is limited by the size of available supply. By contrast, bond speculation is not self-limiting. It is self-aggrandizing. The more it grows, the more bonds will be printed. Or, to save the cost of printing, the more bond-derivatives (futures, call options, put options, options on futures, etc., ad libitum) will be invented. Thereby an avalanche is set into motion which will bury innocent villages down there in the valley. There is nothing that the protagonists of "managed money" can do about it. Bond speculation introduces distortions into the economy that will inevitably cause the downfall of the regime of irredeemable currency. It may or may not be through runaway inflation as in France during the last decade of the eighteenth century. It may be through runaway deflation. In either case, there will be enormous economic pain.

http://www.gold-eagle.com/gold_diges...ete032505.html

[Sapiens]

Re: does intra-bank and LBMA trading affect PM prices?

An ephemeral point at best. One dollar will buy you far less at your local delicatessen or goods store than it did thirty years ago. One ounce of gold will buy you about the same.

LOL, try paying with bullion at your local, national brand store; then see how ephemeral it is.

-Sapiens

[Sapiens]

Re: does intra-bank and LBMA trading affect PM prices?

I'll defer to Bart on the question of the size of the money supply. But you're overlooking something else equally important - money demand.

We learn in Econ 101 that values and prices are set by supply and demand. But for some reason, whenever questions about the value of the currency arise, we act as if the latter doesn't even exist.

Finster, who acts as if the latter doesn't exist. Remember currency, is a very special commodity, it is the commodity that fits every taste and size. Even better, since it is part of what constitutes Money, it tends to be a commodity that is used to set the standard as to how other commodities are measure in value.

-Sapiens

[Spartacus]

Re: did the volume of money shrink?

I bet it did.

How many margin calls do you think went out?

worldwide? - especially in China where allegedly taxi drivers are mortgaging their houses to the armpits to by into the stock markets.

How was that so? Did the money stock shrink?

-Sapiens

[Spartacus]

Re: does intra-bank and LBMA trading affect PM prices?

High correlation has been my constant worry since 2004 when I noticed all asset class prices inflating, across the board.

Bonds, stocks, PMs, commodities, emerging markets, real estate - ALL asset classes.

had another thought on gold falling together with stocks yesterday...