“The more the men of to-day know about the operations that take place in the London Money Market, the greater will be their pride in it, and the greater their ability in upholding its supremacy... for knowledge itself is power.” W.F. Spalding1

arrival of Chinese booty at the Mint. From the ‘Illustrated London News’, 1843. ‘The Royal Mint, An Illustrated History’, p.31. Reproduced with the kind permission of the Royal Mint Museum.

As silver enters the digital age with the daily benchmark value of the precious metal now being set electronically, I was curious to learn more about the introduction of the London silver ‘fixing’ that began in 1897, and the early form it took, which changed little until the outbreak of war in 1939. Over the past 117 years, the ‘fixing’, while perhaps not as glamorous as gold, was a private auction carried out amongst a select group of precious metal dealers. The relatively calm daily ritual performed an important function by setting an exchange price for silver. In terms of monetary history, silver’s price movements over the past century have at times been volatile, erratic and even spectacular.2 Tracing the origin of the ‘fixing’ proved more difficult than anticipated, for there has been little published on the history of the London silver market and even less on the ‘fixing’ process. Tim Green’s (1982) Precious Heritage: three hundred years of Mocatta & Goldsmid continues to offer the best account of the evolution of the market. Early accounts of both the market and the ‘fixing’ are found in literature by Benjamin White (1917) in Silver, Its History and Romance and W. F. Spalding’s (1922) The London Money Market. Roy Jastram’s Silver: The Restless Metal (1981) provides a comparative study of the economic performance of silver between Britain and the United States. While S.L.N. Simha and Janaki Krishnan’s The Saga of Silver (1980) concentrates on the decline and recovery of silver in the East, Donald McDonald’s History of Johnson Matthey, together with archival papers located at the Bank of England and at HSBC, offer further insights into the early relations between the London precious metal brokers and casts light on market procedures. Media reports and annual bullion circulars, produced by both Samuel Montagu & Company and Sharps Pixley Ltd., also proved extremely useful.

The decline of silver and its price

Before 1850, silver and gold had both been important monetary metals. Jastram observed that a number of important factors were at work. Firstly, over the next two decades, increased gold production supplied enough gold to displace silver in its monetary role, following the new gold discoveries in the United States and Australia.3 This presented a substantial advantage of gold as a standard for large transactions, and most European countries subsequently went on to the gold standard during the 1870s.4 This resulted in monetary demand for silver declining in the Western world, leaving monetary demand mainly confined to Asia. Understandably, the price of silver dropped as there were no longer mints to support a fixed price of silver by free coinage.5 Following the establishment of the gold standard almost simultaneously by so many nations, a shortage of gold was experienced. During the 1870s and 1880s, as commerce and trade expanded, world production of gold was constant or declining. The resultant international illiquidity, together with the persistent deflation over the three decades from 1865, saw the price of silver fall along with the price of other commodities.6 Throughout all of this, world production of silver vastly increased from 40 million ounces per year in the 1860s to 160 million ounces in the 1890s.7 Jastram concluded that “an effect on the price was inevitable”. As the crisis in silver unfolded, the London price fell from £0.27 pence per troy ounce (New York $1.42) in 1850 to a low of £0.11pence (New York $0.62) by 1900.8

The London silver market, expansion, intervention and co-operation

During the 1850s, the composition of the London bullion market changed. The market expanded as Sharps & Wilkins, Pixley & Haggard (soon Abell) and Samuel Montague & Co joined Mocatta & Goldsmid as approved silver brokers to the Bank of England, a position that Mocatta had exclusively held between 1721 and 1840. The number of approved refiners listed by the Bank of England also expanded and Johnson & Matthey, Rothschild’s Royal Mint Refinery and H.L. Raphael’s Refinery joined Browne & Wingrove.9

London occupied the enviable position as the world’s leading silver market. Spalding explained that there were two main reasons for this. Firstly, London held the lion’s share of the Far Eastern trade. India and practically all Far Eastern countries were users of silver and whilst some Far Eastern countries were on the gold standard, or something approaching it, silver was power all over the East, both as a commodity and medium of exchange.10 Branches of all the Indian and Far Eastern banks were located in London; these were the principal intermediaries for the mercantile trade of the Far East. Apart from this, geographically, London was a convenient centre for supplying the coinage requirements of European nations. Secondly, there were regular weekly shipments of silver from American and Mexican producers to London, which were dispatched to smelters and refiners before being sold to India through the London brokers.11

“In 1871, 26 years before introduction of the first silver fixing, the four London brokers took steps to protect their market positions against international competition.”

Pyramid of LGD silver bars

In 1871, 26 years before the introduction of the first silver fixing, the four London brokers took steps to protect their market positions against international competition. Papers located in the HSBC archive include a draft agreement drawn up in that year between Mocatta & Goldsmid, Sharps & Wilkins, Pixley, Abell, Langley & Bland and Samuel Montagu & Co., who joined forces to regulate commission rates, charged at three-eighths per cent, and agreed not to compete with each other for purchases of silver imported into London by banking companies by reducing the commission rate. As far as practicable, it was agreed that each firm should have an equal share in the volume of transactions.12 In order to effect the equitable division, whichever brokerage negotiated the sale of silver would, immediately the deal was realised, transmit to the other three firms one-quarter of the commission obtained by the sale. Additionally, it was agreed that Montagu’s had the right to purchase one quarter of each parcel of dore silver, or its refined equivalent for their operation, providing that they decided upon exercising such right within one hour’s notice being given to them by the acting broker.13 Although no price advantage was given to Montagu, the firm was expected to pay the same as that price obtained for the remainder of the parcel. The final clause concerned withdrawal from the agreement should any “serious difficulty in carrying out this arrangement” arise and required one month’s written notice to be given to the remaining three firms. Unfortunately, no accompanying paperwork has survived to suggest exactly why the agreement was drawn up, but I suspect it was in the interest of the London market as a whole by eradicating competition and ending the erosion in commission rates by the four brokers. Abraham Mocatta, in his diary started in 1871, wrote of the “slightly brash rivalry” between the newcomers Pixley and Montagu, who were “always trying to gate-crash Mocatta & Goldsmids long established connections”. The draft agreement provides evidence that the four firms were willing to put differences aside and work together, pledging mutual co-operation and trust. Certainly, 1871 appears to have been a good year for Mocatta & Goldsmid. Most of their business was on private account to Bombay merchants. Abraham recorded that “the demand for silver for India has been the chief cause of the year’s activity” and “has been a great success…..the profits of £13,429.13.8 have only been matched once during the past quarter century”.14

Concerns for the continued declining price of silver sparked the formation of the 1876 House of Commons Select Committee to look into the depreciation of silver. The London bullion brokers presented evidence to the Committee advising that large-scale demonetisation of silver had led to a further fall in the price. The Committee in its final report made no positive suggestions.15 Action over the falling price was taken in the United States in 1878 when a campaign was launched to protect the interests of silver producers. This resulted in the passing of the Bland-Allison Act. The Act required the government to purchase silver in the market, with a value of between $2 million and $4 million, for coinage into dollars.16 Jastram considered that the Act was “entirely ineffective” and it was subsequently replaced in 1890 by a stronger pro-silver law, the Sherman Silver Purchase Act.17 This legislation mandated the Treasury to buy 4.5 million ounces of silver each month, which was almost double the amount actually purchased under the Bland- Allison Act and equated to almost the entire output of the mines in the United States.18 The silver price continued to fall and, in an attempt to reverse it, the Sherman Silver Purchase Act was repealed in 1893. Around 1900, silver dropped off the political agenda as Congress passed the Gold Standard Act.19

The introduction of the London silver fixing in 1897 marked an abrupt change in British price history and a new era in the market’s structure.20 As London handled the bulk of silver produced, it followed that it was London that called the tune and ‘fixed’ the price for the whole world.21 During the summer of 1896,after almost two decades of continuous decline, the silver price reached an all-time low. The volatility of the price made a daily silver fixing necessary. Before the demonetisation of silver, and the great fall in price that followed, the fluctuations as well as the volume of business transacted were so small that the operation of ‘fixing’ had been carried out by informal change of notes or by verbal messages.22 The first ‘fixing’ meeting was held at the offices of Sharps & Wilkins, 32 Great Winchester Street, with the other three London brokers Mocatta & Goldsmid, Pixley & Abell and Samuel Montagu in attendance. The brokers met once a day with their buying and selling orders in hand, where they would then enter a room and negotiate the price for silver based on those orders. The ‘fixing’ price of silver controlled the price of the metal in every important financial centre throughout the world.23 The finer details of the ‘fixing’ process were explained to readers of The Times:

“The method was for each broker to total up his orders, and from his ‘book’ he estimated what he considered the price should be. From the result he sent a note to one or other of the brokers giving his opinion; in return he would get a reply giving other points of view and possibly suggesting a sale to, or a purchase from them, of so many thousand ounces. After an interchange of notes of this nature the price would be mutually agreed upon and officially announced. Nowadays [1933], the partners of the four firms meet and after each broker has balanced his buying orders against his selling orders the price is moved by sixteenths of a penny until the required balance is obtained or disposed of.”24

During the ‘fixing’ process, the brokers had no contact with the outside world or their own firms – of course, in 1897, telephones were the exception rather than the rule. Direct telegraph links with New York and Bombay made the daily price available internationally. Those attending the market were the people who could make decisions about the trading position of their firm. Each broker, whilst he may disclose the excess of his own position as a buyer or a seller at a given price, was careful to protect in every possible way the interests of his clients and to preserve their anonymity. It was quite possible for the business done in the market upon a given day to be extremely large, as clients were advised to give a discretion to brokers as to the quantity of silver desirable to operate for their account upon any one day.25 Within a very short time, two prices were ‘fixed’ daily at 1.45 pm Monday through Friday and at 11.45 am on Saturday – cash (up to seven days) and two months forward.26 The average cash price of silver for 1897 was 27.56 pence per standard ounce.27 McDonald, in his own explanation of the ‘fixing’, wrote that:

“There was very frequently a small difference between the two rates reflecting the relative demand. Two months was a useful period to enable [for those buying their metal unrefined to arrange for] the refiner to carry out his work and also to cover the transportation of metal already refined. The market was a thriving one, the preponderance of supply coming from the Americas and the demand from the silver using countries of the east and the traffic could go both ways. It can fairly be said that the London Silver Market helped among the other markets, to make that city the financial center of the world.”28

The two-month delay also enabled those who bought unrefined silver to cover themselves against a fall in the price of silver bought for manufacturing by making it possible for them to sell an equivalent amount of silver ‘spot’ from stock and to buy it ‘forward’ for replacement two months hence, so reducing their possible loss to the usually small discount between the two prices.29 The two periods of delivery – cash and two months forward – were obligatory between brokers, but brokers could, as a rule, make arrangements with their clients so as to suit the latters’ convenience with regard to shipping, etc. This may have involved an expense to the broker in loss of interest, etc. and also some risk of failure to keep engagements that he had contracted with another broker in order to execute his client’s business.30

At the turn of the 20th century, business in silver differed from that in gold in several ways. The most notable was that there was no ultimate buyer with a fixed price. Silver, like any other commodity, is subject to the forces of demand and supply, and is open to political and economic disturbances. The prime cause in price variation was from wars and financial crises, but also an important factor were the varying demands from the economies of India and China, based on silver. As silver rarely occurs in nature as native metal, it was necessary to conduct a complex chemical or smelting operation, or series of operations, by the bullion refiner before the silver could be put into a suitable condition to be offered for sale.31 Between 1860 and 1914, one of the main sources of supply received in London came from demonetised silver coin. White described the arrival and treatment of a consignment of coins he witnessed whilst visiting the Rothschild Royal Mint Refinery:

“Silver arrives in wooden boxes containing – in case of dollars – about 3,000 pieces, 1000 in a bag. It’s interesting to watch the ease with which an expert workman trundles each box into position, tips it upon end, severs the iron hooping and splits the side with one blow of the axe, lets the box slide flat on the floor and, with one more blow, spirits the upper iron band, and lid as well. Then with a blow sideways from the back of the axe, he lays the box upon its side and wrenches the split side open with his hands if loose enough, or with his axe if it clings together; and in less than a minute the three bags are lying loose around the fragments of the box. Each bag of coins is then emptied separately into the scale and weighed. Though more difficult to stack, bags of coin can be built up into a solid wall, provided the two ends are securely held by silver bars or by the sides of the safe.”32

After 30 July 1914, just preceding the declaration of war by Britain against Germany, the official quotation for forward delivery was temporarily discontinued. War brought silver to the fore again. In 1917, when the price rose to 0.55 pence per ounce, due to heavy demand from India and other countries, the United States, Britain and Canada combined to introduce control restrictions over silver trade and prohibited its export without a licence in their respective territories.33 In 1918, Britain was forced to appeal to the United States to sell part of its silver reserves, as a shortage of supplies caused a near crisis in India when the market value of the metal rose to equal the bullion value of the rupee. The Pittman Act, passed by Congress in 1918, authorised the sale and prevented the large-scale melting down and export of silver coin.34 These measures were successful in keeping the price of silver in the range of 0.41 to 0.49 pence for the remainder of the conflict.35 Increased demand for silver for coinage and industrial purposes saw the price double during the years of conflict; however, its revival was short-lived and the price of silver declined over the next two decades.

Dr Michele Blagg (BA, MA, PhD) is a visiting Research Associate at the Institute of Contemporary British History (ICBH) at King’s College University. Michele is a Research Consultant for the LBMA, currently engaged on the oral history project ‘Voices of the London Bullion Market’. As part if a collaborative doctoral award granted by the Art’s and Humanities Research Council, she was based at the Rothschild Archive. Her doctoral research focused on the Royal Mint Refinery, operated by N M Rothschild & Sons between 1852 and 1968, and how it adapted to the changed London gold market.

Her areas of interest are in financial and business history with special regard for the actors and networks located in the London market.

She teaches on the MA in Contemporary British History and assists with the Witness Seminar Programme. She sits on the Business Archives Council Executive and is involve in the annual ‘Meet the Archivists’ workshop held in the City that aims to explore ways in which research students can identify and use business records in a variety of different research fields.

  1. W. F. Spalding, The London Money Market (London: Sir Isaac Pitman & Sons Ltd., 1922), p.199.
  2. By the early part of the thirteenth century foreign trade brought quantities of foreign coin and bullion into the country and it was mainly from this source that the silver for the increasing needs of coinage was obtained. For this purpose each mint had an exchange at which foreign coin or bullion or old coin, when recoinages were undertaken, could be exchanged for new English coin but for this service a charge was levied of which a part, known as a seignorage, went to the King and the other part to the mint-master to pay the expenses of the Mint and to yield him a profit, (see The Royal Mint, An Outline History, London 1953, p.8).
  3. Roy Jastram, Silver: The Restless Metal (Canada: John Wiley & Sons inc, 1981), p.75.
  4. Ibid., p.76.
  5. From the eighth century the English silver coins contained 92.5 per cent of fine silver and, except for a short interval in the sixteenth century, this composition continued until 1920. Following the first World War the price of silver rose so high that the metal value of the coins was for a short time higher than the face value (see for further details, The Royal Mint, An Outline History, London: Private publication, 1953, p.13).
  6. Jastram, Silver, p.75. 7 Ibid., p.76.
  7. Ibid.
  8. Timothy Green, Precious Heritage: three hundred years of Mocatta & Goldsmid (London: Rosendale Press, 1983), p.26-7; Mocatta & Goldsmid remained exclusive silver brokers to the India Office, which had replaced the old East India Company, and fulfilled large silver contracts for them as long as the British ruled India, p. 27.
  9. Spalding, London Money Market, p.172-3. 11 Ibid.
  10. HSBC Group Archive, UK/1432/0058/006, ‘Draft Agreement’, Sep 1871.
  11. Ibid.
  12. Green, Precious Heritage, p.29.
  13. S. L. N. Simha and Janaki G. Krishnan, The Saga of Silver (Madras, Institute for Financial Management and Research, 1980), p.54.
  14. Simha & Krishnan, The Saga of Silver, p.61. During the 12 years the Act was in force a total of 291.20 million ounces of silver were purchased at a cost of $308 million.
  15. Jastram, Silver, p.78. 18 Ibid.
  16. Ibid. In the Presidential election in 1896 the defeat of the Democratic candidate William Jennings Bryan, an extreme silverite whose key issue had been bimetallism, saw the end to the ‘free-silver’ movement which never recovered.
  17. The Economist made early reference to the term ‘fixing the price’ in relation to precious metal as it was explained that “the term thus used does not imply a ‘fixed price’ in the same sense that a ‘fixed price’ of any other article expressed in money, but to all intents and purposes merely signifies a fixed quantity of metal in the coin” (The Economist, ‘A fixed price of gold – The balance of power in Europe’, 4 Dec 1847).
  18. Spalding, London Money Market, p.172.
  19. Benjamin White, Silver, Its History and Romance (London: Hodder and Stoughton, 1917), p.166.
  20. Ibid.
  21. The Times, ‘Dealings in Precious Metals, How Business is conducted’, 20 Jun 1933.
  22. White, Silver, p.168.
  23. The London Silver Market (Private publication, 1982). 27 Simha & Krishnan, The Saga of Silver, p.49. Prices of bar silver in London were quoted per standard ounce from 1890 to 1900 and thereafter per ounce of 0.999 fineness.
  24. Donald McDonald, The History of Johnson Matthey and Company, Volume One, The Years of building, 1860-1914 (London: private publication, 1974), p.37.
  25. McDonald, Johnson Matthey, p.112. 30 White, Silver, p.187.
  26. McDonald, Johnson Matthey, p.38. 32 White, Silver, p.189.
  27. Simha & Krishnan, The Saga of Silver, pp.83-8.
  28. The Pittman Act, enacted in April 1918, authorised the conversion and sale of 350 million silver dollars into bullion. Under the Act, 270,232,722 standard dollars were converted into bullion (259,121,554 for sale to Britain at $1.00 per refined ounce, plus mint charges). 35 Simha & Krishnan, The Saga of Silver, p.84.