Posts Tagged ‘London Fix’

Flag of the United States Federal Reserve Bank

On February 6, 2011, The Daily Bell featured the interview, “Richard Maybury on the Collapse of the Anglo-American Empire and What It Means for You.

In it, I noticed an attempt to discredit interest-free United States Notes, which, as  I have previously documented, the privately owned Federal Reserve banking cartel lies about.

At first glance, it indeed seems like strange bedfellows for a privately owned central banking cartel and a self-described “free-market” site to both be discrediting a particular form of currency, which the Federal Reserve lies in claiming to “serve no function that is not already served by Federal Reserve notes.

However, once you “follow the money,” the picture becomes more clear.

Posted by FauxCapitalist on 2/7/2011 12:33:56 PM
Mr. Wile,

It says on your bio that you are a staunch advocate of free banking, yet I also see that you worked for ScotiaMcLeod, the investment division of one of Canada’s Big Five government-enforced oligopolistic banks. Their investment company, ScotiaMocatta, Canada’s largest precious metals bank, is Chair of the London Fix, which fixes the price of gold and silver every day.

Since you asked Richard Mayberry, “What do you think of the Brownian green backer movement? Is US Intel actively promoting it?”, my question for you is, is the Greenbacker movement being actively demoted by the very “large international banks” your own bio says you continue to consult for?

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Mojave Nugget, a gold nugget weighing 156 ounc...

On January 21, 1980, the Dow closed at 872.78 and gold closed at $850 USD an ounce on the London Fix.

From the Bureau of Labor Statistic’s Inflation Calculator, $850 in 1980 has the same buying power as $2249.36 in 2010.

If gold had kept up with inflation since its 1980 high, it would be worth over $2249 instead of its January 14, 2011 close of $1367.00 on the London Fix.

The Dow closed at 11,787.38 on January 14, a 1351% increase versus gold’s 56.6% increase over the same period.

So much for the oft-repeated, often absolute statement that: “gold is a great hedge against inflation.”

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Crystaline Gold

As an example of what I regard as the inordinate fixation on gold that I continue to see, LewRockwell.com has on their home page at the close of 2010, the article:

The Economic Flop That Was 2010
Except for gold, it was flat and lifeless from the get-go. Obituary by Bill Bonner.

The article itself only makes a single reference to gold at the end of a long chain of bad news. “Gold investors end the year nearly 30% richer.

Why the inordinate fixation on gold? Especially this year, when silver is up 80% from a year ago today, from $16.99 USD an ounce to $30.63, and palladium is up 97%, from $402.00 USD an ounce to $791.00 on the London Fix.

You can scarcely find mention of platinum and palladium in the libertarian forums. For some reason, platinum remains the overlooked investment metal and currency, and palladium has outperformed gold and silver for the second year in a row.

The primary justification given for the mass ignorance of platinum and palladium is that they have never had a historical monetary use (which is false). Their monetary use, as evidenced by having international currency codes, has been less primarily because their extraction wasn’t feasible until modern times, not because they were never feasible as currencies.

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Back in April, there was the report that Canada’s largest precious metals bank and member of the London Fix, Scotiabank, had almost no gold in their vault.

From their FAQ:

How secure is a “gold certificate”?

Scotiabank gold certificates are backed by the assets of The Bank of Nova Scotia.

Nowhere do they claim to have any physical gold backing their certificates.

If you buy a certificate, you will see that they are legally required to deliver you the gold within a specified number of days after redemption, not immediately.

Given their membership on the London Fix, and history of precious metals trading, they will likely be able to deliver physical gold to you according to the contract, barring an all-out physical gold redemption bank run.

Even if you don’t get your physical gold, your underlying assets are denominated in USDs, so if the USD plummets, your holdings will be inflation-protected relative to gold, unlike if they were sitting in a savings account.

Given that the Big Five Canadian banks have been consistently paying dividends since the 1800s — 1832 in the case of Scotiabank — I think it highly unlikely that all your assets would go the way of those held in the 5000+ U.S. banks that collapsed from 1929-1932.

But, as they say in investment prospectuses, past performance is no guarantee of future results.

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In January 1980, gold closed at $850 USD an ounce on the London Fix. From the 21 years until 2001, it trended mostly downward. In 2001, it rose from a low of $255.95 to a high of $1218.25 by 2009.

As a result of this rapid rise, investment demand for gold surpassed its jewellery demand in 2009 for the first time since 1980.

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Gold closed at the end of 2009 at $1104.00 USD on the London Fix, while silver closed at $16.99, platinum at $1466.00 and palladium at $402.00.

Yesterday, gold closed at an all-time high of $1222.50, while silver closed at $18.42, platinum at $1689.00 and palladium at $521.00.

While gold was up 10.7%, silver was up 8.4%, platinum was up 15.2% and palladium was up 29.6%.

Why do platinum and palladium continue to be overlooked as investment metals among the four precious metals with an international currency code? Palladium was the best-performing metal of the four in 2009, and continues to be this year. Platinum outperformed gold in 2009 and continues to outperform gold this year.

Previously, I wrote why platinum is the overlooked investment metal and currency.

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From the historical London Fix data for 2009 on Kitco.com:

Gold went from a low of $810.00 USD an ounce on January 15, to a high of $1218.25 on December 3 — a 50% increase.

Platinum went from a low of $915.00 an ounce on January 15, to a high of $1500.00 on December 3 — a 64% increase.

Silver went from a low of $10.51 an ounce on January 15, to a high of $19.18 on December 2 — an 82% increase.

Palladium went from a low of $176.00 an ounce on January 15, to a high of $402.00 on December 31 — a 128% increase.

To those who say palladium has no historical use as a currency, consider that it has its own international currency code (XPD), along with gold (XAU), silver (XAG) and platinum (XPT), the Canadian Mint minted one ounce coins from 2005-2007 and in 2009, and you can purchase that and other palladium bullion here, and from other stores like Kitco.

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