Looking for something different to read during my midday break today, I visited The Perth Mint’s library and came across “Messrs. Mocatta and Goldsmid’s Circular on the Movements of Gold and Silver during 1913”, an Appendix to the British Royal Mint’s 1913 Annual Report.

Silver investors will find this circular of 100 years ago of interest as Messrs. Mocatta and Goldsmid spend three of their four page report on the silver market.

January saw the highest silver price for the year of 29 & 3/8 pennies. From that point the price fell to 26 & 1/16 on 25 March on account of “the market becoming very despondent with regard to the China loan negotiations” as well as “the Balkan war and other causes were keeping money very dear and helping to deter buyers” but the market recovered in April when the Chinese loan was signed. A century later it is the Chinese with excess foreign reserves to lend.

May was steady, “but the heavy stock of silver in London, which then amounted to nearly 4,000,000l., was discouraging to buyers” (Note, l. means pounds). Then, as now, India and a promising monsoon were important drivers of the market. However, while “the prospects of bumper crops were most favourable, the Indian Government seemed very reluctant to commence purchasing”.

One thing that has not changed in 100 years is stealthy central bank transactions, with Messrs. Mocatta and Goldsmid noting that India’s purchases were “unsuspected by the market for some time and it was not till the huge stock of 4,200,000l. which had been accumulated in London was reduced by three shipments of 1,000,000l. each in three consecutive weeks that it was realised to what extent the Government had bought.”

In November “rumours of financial trouble in Bombay and many failures in the Mill Share market, caused great uneasiness as to the financial standing of the Bull speculators, who had for so long been operating in silver on such an enormous scale.” The price recovered on the formation of a syndicate to “take over all the ready silver and the contracts for forward delivery” which “caused the Bears, whose commitments for December and January were exceptionally large, to partially cover”.

I’m sure today’s silver investors would love to have enormous “Bull speculators” and “syndicates” panicking “the Bears” into covering, with the circular noting that "... huge bull account, which has been such a menace to the market for many years, has now passed into very strong hands..."

Messrs. Mocatta and Goldsmid continue on to report on production problems in Mexico and the appearance of backwardation in silver in September.

They conclude their silver market summary with some sage and timeless advice from 100 years ago: “It is always difficult, if not dangerous, to express any opinion as to the probable course of silver, and owing to the recent startling developments it is particularly difficult to do so for the coming year…”

Little did they know that less than seven months later, on 28 July 1914, the world would be at war and financial markets truly would be “startled”.

Download the full Messrs. Mocatta and Goldsmid’s Circular here (pdf 310kb).