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The Grand LBMA Exposé: A Collective-Mind Analysis

Part - 1

September 8, 1997


The London Bullion Marketing Association (LBMA) can only be adequately described as "a riddle wrapped in a mystery inside an enigma."

It shyly emerged upon the news airwaves on January 30, 1997. Its appearance was almost as an after-thought, deceptively innocuous with few superlatives to distinguish it from the daily diarrhea of financial news spewing forth from the bowels of the world's money centers. Few readers took note of it... most gave it little import. To my knowledge it was an esoteric select few at the Kitco Gold Chat group, who really zeroed in on the draconian significance of the news.

Was the news a bureaucratic slip of utmost discreet information - indeed top secret data - or was it a well-timed and methodically planned leak to the press. Or perhaps it was the "whistle-blowing" of an irate employee, who was passed over for promotion? Who really knows? In any case we will provide all the details surrounding this monumental announcement... and allow the reader to draw his own conclusions.

This writer will present the entire situation via a chronicle of all the news publications about the subject, providing dates sources and authors - where possible. Nearly all available information was researched from Internet sources. Most comments are verbatim from respective authors. Occasionally, this writer added comments of clarification and/or conclusions where the research leaves off.

The LBMA Announcement -

Literally at the crack of London dawn on January 30, 1997, the London Financial Times printed the following:

The London Financial Times

Gold global market revealed


By Kenneth Gooding, Mining Correspondent

Deals involving about 30 million troy ounces, or 930 tonnes, of gold valued at more than $10 billion are cleared every working day in London, the international settlement centre for gold bullion.

This is the first authoritative indication of the size of the global gold market, and was revealed yesterday by the London Bullion Market Association.

With the blessing of the Bank of England, the association overturned years of tradition and secrecy to provide statistics illustrating the size and depth of the London market.

The volume of gold cleared every day in London represented nearly twice the production from South African mines in a year, Mr. Alan Baker, chairman of the association, pointed out.

It was also equivalent to the amount of gold held in the reserves of European Union central banks.

The size of the gold market will surprise many observers, but traders insisted the association's statistics were only part of the picture because matched orders are cleared without appearing in the statistics. Mr. Jeffrey Rhodes, of Standard Bank, London, said the 30m ounces should be "multiplied by three, and possibly five, to give the full scope of the global market".

Mr. Baker said the association would produce average daily clearance figures every month. "They will provide a useful benchmark for comparison and analysis of trends in the volume of the global bullion business," he predicted.

He denied suggestions that the move might drive business away from London by upsetting clients who preferred secrecy. "These figures do not in any way affect the confidentiality of the market. While discretion and integrity will always be bywords in the London bullion market, the LBMA is nevertheless conscious of the general call for greater transparency in markets.

"The statistics demonstrate the prominence of London in the world of bullion, something we have long been aware of but which until now has been difficult to demonstrate with statistics."

LBMA members were divided over the move. One said he was puzzled. "What will people make of it?" Another said the exercise was "futile" because it did not give a complete picture of bullion market activity.

But Standard Bank's Mr. Rhodes suggested the statistics would "become the key indicator in the world of gold, providing the numbers by which the market can be monitored".

Mr. Martin Stokes, vice-chairman of the association, said: "This shows we have a serious market with a lot of depth and deserving of more attention." The statistics showed, for example, that the 300 tonnes of gold sold recently by the Dutch central bank - a disposal that badly affected bullion market sentiment - was not a large amount by the market's standards. The association was "making a bid to attract investors' interest".

The association also gave details yesterday about the silver market. Roughly 250 million ounces of silver valued at more than $1 billion are cleared daily in London.

It also published the results of a Bank of England survey of turnover that the 14 market-making members of the LBMA in the London bullion market conducted in May last year. This showed about 7 million ounces of gold, worth nearly $3 billion, was traded daily by these market-makers.

Writer's comment: In light of these startling revelations, various observations may be gleaned from this publication by the London Financial Times.

  1. In view of the humongous daily trading volume of gold by the LBMA, annual supply/demand dynamics may have little to NO INFLUENCE on the long-term price of the noble metal - albeit can cause short-term ripples one way or the other.
  2. The formidable volume of daily trading strongly resembles that of currency trading -- indeed many world experts staunchly proclaim gold to be the universal currency... and history undeniably supports this assertion.
  3. Fear of Central Bank sales of gold may be totally exaggerated - and may really have only a minuscule and temporary impact on gold prices.
  4. The LBMA is a highly liquid gold environment, conducive for speculative trading - ESPECIALLY NOW THAT THE 'CAT IS OUT OF THE BAG.' Could this be the ulterior motive for breaking the secrecy code of ALMOST TWO CENTURIES?????????????
  5. At the current daily trading rate, more than 100 TIMES THE ANNUAL WORLD'S GOLD PRODUCTION RATE IS TRADED ANNUALLY in the LBMA!!! Other than currencies, can anyone mention any commodity experiencing yearly trading volume of 100 times its annual production?! ANYONE?! Does this not pique your curiosity and question the reason or purpose of all this gold trading?!


Internet Commentary #1 -

Posted on the Internet January 30, 1997 by Selby of Canada

930 X5 X 52 =241,800 tons of gold moving through London per year. This unexpected amount must have some effect on the forces postulated here and elsewhere as moving the price daily--even intra daily. Can the CB's really fine tune the price with this amount of gold to deal with daily? Hoarding and annual fluctuations in production seem minor. New production would have a minor effect (got my question answered I think ). Does the cost of production count for much after all? Can summer vacations of Italian chain makers still be used to explain the sometime summer dip? Does any of this gold ever get into the kiddy market that the rest of us play in? Matched orders are not included in the figures according to a report posted earlier. Does this mean that the 241,000 tons are an actual market and not just paper entries being assigned to a few hands when the music stops at the end of each day. Who has the cash to play this game?

Internet Commentary #2 -

Posted on the Internet January 31, 1997 by vronsky


Since there was absolutely no discussion elicited from CMAX's keen conclusions about the heretofore occult gold trading operations by the London Bullion Market Association, may I respectfully submit that it was NOT carefully read by Kitco viewers. The news is without a doubt - IMHO - monumental with potentially dramatic influence on gold prices. And therefore should be re-read carefully - word for word - so the full impact and long-term significance may be appreciated. We definitely need more keen discussion on this subject by the highly discerning and perceptive analytical minds at Kitco. With all due respect to the financial press, I believe an erudite interpretation - and ramifications - of this blockbuster news is well over the heads of most journalists. Thx CMAX for helping clear my own thoughts on the subject.

Internet Commentary #3 -

Posted on the Internet January 31, 1997 by GFD

I think that CMAX has hit the nail on the head. It is very hard not see the loco revelations as announcing a new currency. BTW aurophile was alluding to this yesterday with his observations on how the LME has grown to dominate copper trading and has supplanted the New York Fed as the primary gold clearing house.

While the London market appears to be large enough to shrug off CB manipulation the CB's must almost certainly have had complete access to their statistics. Furthermore, I suspect that they did have to get approval of the Central Bank's to "come out" - at least from the Bank of England.

So here we have the bizarre possibility that the CB's have agreed to the announcement of their own ( paper based ) demise - with the public emergence of a viable commodity based currency system...

So, repeating a question I raised yesterday, is this announcement a powerplay by London to replace New York and Tokyo?? Or is there some more "occult" reason for this??? Are the Central Bank's laying the ground for a "backup" system due to fears of an impending (but occult) meltdown in paper??

Internet Commentary #4 -

Posted on the Internet January 31, 1997 by Cmax

HOW HOW WOW....., is this "enlightened" age of information, exist something SO large as loco London?? It has been hidden all this time not by government mandate...but by private enterprise. Selby gives a number of 241,000 tons per year moved through this market; that is 660 TONS PER DAY! And we have been blaming news releases on the Dutch for their little 300 ton sale (during the year) as a major contributing factor in the slump of gold? No way. The "discovery" of loco London, economically, is akin to the discovery of the New World by Columbus. 30 million ounces traded in ONE day (Jan 29)? These are not COMEX numbers....these are numbers of a GOLDEN ALTERNATE CURRENCY, here and NOW. I don't think the world has yet REALLY assimilated what this really means. Goldgugs have been putting the excuse of their plight on gold "management" by Central Banks. With these numbers flowing in the previously occulted London Exchange, Central Bank's could not possibly manipulate. Gold then must be acting NOW as a commodity, supply and demand. And the price that we have now, is it's commodity price (rather than manipulated price). And as any commodity, it is subject to the market's perception. Popular economists refer to gold as a dead horse....these are not numbers of an inactive currency. WHEN the masses translate this loco London information, the perception of gold must change dramatically.

After all, this information was only released what....3 days ago? The Central Bank directors must be squirming when they see these numbers. With such incredibly high volume, and great fundamentals, do you REALLY think that this large of a market can allow gold to drop much further? I don't see how. However, we do have a paradox: Since gold as an alternative currency DOES exist, why is it SO cheap? I remember Ann Rand saying somewhere that in nature, paradoxes cannot must recheck their premises. Our PREMISES definitely need some rechecking now; OR the general market needs to recheck their's. Gold, with this volume (and new information), is behaving paranormally. Next question is:

What ever prompted the "perfectly" occulted London gold market to go public??

This is against the very nature of it's participants. And against the interests of the Central Bank's and governments. This London market is no little news...what are their intentions with this release? First thing that comes to mind, is that if I wanted to undermine the very root of fiat currencies, this is exactly the information I would release.

Internet Commentary #5 -

Posted on the Internet January 31, 1997 by IDT

Perhaps the LBMA news was released under political pressure because the Brits want out of the common European currency, or perhaps a stronger hand in its formation. What they are in effect saying is that while the dollar, yen, and DM are the world's reserve currency, we hold the gold currency.



(September 8, 1997)

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(Coming in a few days Part - 2)

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