Through Trade Combinations.
—The world’s output of silver is controlled by the London market. To a small extent this may be due to a trade combination; to a large extent it is due to the relations of the London market with consumers.
Four firms form the London silver market. Silver prices are fixed daily in London, and this “fixed” quotation controls the price of the metal in every important financial center throughout the world.
There are three refineries in London that handle practically the whole of the silver bullion that comes on the London market. No silver can be bought or sold in London unless assayed by one of the four official assayers to the Mint, Bank of England, etc. Silver treated by the London refineries and certain bars from European government refineries are exceptions to this rule.
The London refineries produce silver of the fineness ⁹⁹⁶⁄₁₀₀₀ to suit the Indian market. Other silver current in the London market has a fineness of ⁹⁹⁹⁄₁₀₀₀.
In the words of Benjamin White: “The care taken to safeguard the reputation of the London silver market, the high standing of the firms that comprise it, and the confidence built up by the methods and practices adopted to protect the interests of buyer and seller alike, provide a strong guarantee that in the future, as well as in the past, silver will find its business center in London.”
Through Relations with Consumers—England’s Control of Silver.
—As already indicated, India and China are the great consumers of silver. For the five years preceding 1914, fully 40 per cent. of the world’s silver output was shipped from London to those two countries, which, with a combined population of over 700,000,000, represent the buying side of the world’s silver market, just as North America represents the selling side.
Since 1914 the capacity of these countries to absorb silver has steadily increased and in 1918 it was mainly a question of where the silver could be obtained. Current production was inadequate to meet the demands, and old stocks of the precious metal were of necessity put on the market.
The world’s silver business consists in getting the metal from the Americas to the East. Why send it via London, exposing the precious metal to greater marine hazards and losing interest while in transit? The main reason is that the chief trade of China and India with western nations is with England, and the great banking houses that finance this trade are in London. These banks purchase silver in London to adjust exchange balances. Funds to purchase such silver usually originate in London, whether from bills on London, loans from London banks or in other ways. In addition, London has been the center of the world’s finance and foreign trade, and also the center from which the mail steamers, the swiftest and cheapest routes to the principal consumers of silver, have radiated.