Safehaven | They Only Fix What's Broken | Printer Friendly Version

February 22, 2006

They Only Fix What's Broken
by Rob Kirby

On the 15th March 1968, the authorities closed the London gold market for two weeks, following an unprecedented three-day speculative surge of gold buying. When the London gold market re-opened on the 1st of April 1968, it fixed the price in dollars not sterling, with the gold price no longer set, but free to float and with prices set twice a day, both in the morning and afternoon.

Over the course of more than 80 years of the gold fixing, the highest fix was US$850 per ounce on the 21 st of January 1980, amid the political crisis in the Middle East, high oil prices and inflation. The longest fixing lasted for 2 hours and fifteen minutes when the stock markets crashed on Black Monday in late October [19th] 1987. The highest turnover occurred in March 1968 just before the gold pool collapsed - 14,180 400oz London Good Delivery bars were traded.

Reading that it took more than two hours to "fix" the price of gold got me thinking?

Let's take a look at what that Oct. 19, 1987 price fix - recorded for posterity - was:

Now let's think about this for a moment - the stock market dropped more than 20% in a single day - and on the surface it looks like price of gold reacted with movement of 15 bucks and change by day's end at the P.M. fix - less than 4%.

But On Closer Examination...

Consider it took more than 2 hours and fifteen minutes to arrive at this price - 481.00 - the pm fix on Monday, Oct. 19, 1987. The A.M. fix that same day [before North American Equity Markets opened] was 479.50 [up 15 bucks]. Now consider this:

The Gold Fixing is conducted twice a day by telephone, at approximately 10:30 am and 3:00 pm. There are five Gold Fixing members - all of whom are Market Making members of the LBMA.

The important or relevant points here are two crucial time differentials: namely, 4½ hours between the fixes. Gold had ostensibly made its move [15 bucks worth] prior to the opening of North American Stock Exchanges [10:30 am - 5 hrs = 5:30 am Eastern Time in N.Y.] The cause of this 15 dollar rise at the am fix is therefore attributable to the 100+ point decline in the DOW on the preceding Friday - most of which occurred AFTER the pm [London] gold fix on Friday Oct 16.

Things were about to get much worse. On Friday, October 16th the Dow opened about 10 points higher. It started to drop almost immediately. At its worst level, just before the close, the Dow was down 130 points. The Dow closed down 108.35 points (-4.6%) on record volume. The 338 million shares traded were 10% greater than the previous record of 302 million. The headlines reflect bewilderment.

Also, with Monday's [19th] scheduled 3:00 pm fix being delayed - taking 2 - 1/4 hours - the pm fix was not posted until 5:15 pm GMT or 12:15 pm ET - by which time the DOW had fallen 300+ points. So why did it take two hrs and fifteen minutes to "reset the price" from 479.50 to 481.00?

AM vs. PM Fix at LBMA, Sterling and $ U.S.

16/10/87	278.960	464.25	279.600	465.25
19/10/87	284.710	479.50	286.220	481.00
20/10/87	288.300	481.60	280.710	464.30
21/10/87	282.310	466.65	281.720	467.00

Data compliments of: LBMA

We need to remember that,

If at the opening price there are only buyers or only sellers, or if the numbers of bars to be bought or sold does not balance, the price is moved and the same procedure is followed until a balance is achieved. The Chairman then announces that the price is fixed. It should be noted that the Fix is said to balance if the buy amount and the sell amount are within 25 bars of each other. The Fixing will last as long as it is necessary to establish a price that satisfies both buyers and sellers.

I find it most interesting that historical data is available regarding the am and pm fixes for the LBMA as far back as 1985 but statistical data for amounts of precious metal "cleared" is only available from 1998 onward? Wonder how much physical gold might have traded that fateful day?

Could it be that the extra ordinary time [2 - ¼ hours] required to make this suspicious fix was due to telephone calls to the Bank of England to secure or mobilize the necessary amount of Central Bank Bullion to cap the price? I'd bet on it because on the surface - it appears that a 100 point decline in the DOW [4.6 % at the time] caused a 3+ % rise in the price of gold and a subsequent decline of 20 % in the DOW was met with a paltry rise of $ 1.25 [1/4 of 1 %] in the price of gold. Not on my planet folks!

GATA reset the clocks as to when gold price manipulation really started in earnest folks - and recalibrate - again - how much gold Central Banks really have in their vaults too.

You see folks, as GATA has long maintained - the price of gold has been surreptitiously rigged for a long time. The rigging scheme is now falling apart. This is all so vitally important because even in the fiat money system we have today, gold still underpins its value and a rapidly rising price of gold spells a lack of trust and doom for paper money.

This is clearly causing rancor at the highest levels - and is evidenced by the BIS - the ultra-secretive Central Bank of Central Banks - which has now begun railing for a Global Currency,

BIS Calls For Global Currency
Nazi bankrollers want elimination of national sovereignty for world cashless control grid

Paul Joseph Watson/Prison Planet.com | February 21 2006

The scandal-ridden and highly secretive Bank For International Settlements, considered to be the world's top central banking policy, has released a policy paper that calls for the end of national currencies in favor of a global model of currency formats.....

The experiment of an un-backed - global - fiat reserve currency , that began in August of 1971 is now being shown for what it has long been - an unmitigated failure. First, our jobs disappeared. Now, our currencies seem to be on the same 'planned' path to extinction. Next on the menu, no doubt is our sovereignty.

Isn't Globalization fun?

Rob Kirby
Kirby Analytics