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