The London Bullion Market Association ISSUE 62 May 2011

In this issue

SilverFrom analysis of reference materials to a

new ISO Standardby Jonathan J Jodry

page 3

Mass Measurements in the UKWhat’s in a kilogram?

by Ian Severnpage 7

What Do Academics Think TheyKnow about Gold?

by Brian M Luceypage 12

Not Seeking PerfectionA confusion of aims in Good Delivery

By Stewart Murraypage 15

Regulation UpdateAdding gold to Europe’s liquidity buffers

by Natalie Dempsterpage 18

LBMA News by Stewart Murray

page 20

Editorial Commentby Bob Takai

page 22

Silver Industrial DemandOutlook Looks Bright

by Michael DiRienzopage 23

Photograph © MEP Group

Silver’s Sunlit Uplands – Lucainena de las Torres, Almeria, one of many solar energy parks using photovoltaic

panels. Michael DiRienzo highlights some key industrial uses for silver on page 23.

Analysis and standards are vital however the price moves: Jonathan J Jodry shares the process of analysing LBMA

Certified Reference Materials at Metalor on page 3.

The Fourth LBMA Assaying and Refining Seminar was held at Armourers’ Hall on 7-8 MARCH, 2011. More than 120 delegates attended, enjoying both

presentations building on the work of previous seminars and those on new topics. Two highlights are

printed in this publication: Jonathan J Jodry’s description of work on certified silver reference materials is

on the facing page and Dr Ian Severn’s explanation of mass measurement in the UK begins on page seven.

All presentations and transcripts from the seminar can be found in the Members’ area of the LBMA website.

I shall focus specifically on the

LBMA certified silver reference

materials. When we started our

analyses, I was expecting it to be a

pretty straightforward process. We

believed that we knew how to

analyse silver, but discovered in

the process that the analysis was

much more difficult than

expected. We had to change our

methods so much that we are now

proposing a change to the

international standard for the

analysis of silver.

General ApproachNormally two techniques are used. First, thereis analysis as a solid, which is typically done byspark OES spectrometry, a very fast methodwith several problems. The calibration iscomplex, you can only analyse a limitednumber of elements and it is only appropriatefor specific shapes. The second technique is toanalyse material as a solution. This is a precise,versatile method – at least it can be precise.The only problem is that you need to dissolvethe material quantitatively.

For gold, platinum and palladium, theprocess is quite straightforward: aqua regia willeventually dissolve the material. Sometimesyou have to use heat, sometimes you have touse pressure, but it will eventually dissolve.And this is not new chemistry; aqua regia hasbeen known since the 11th century.

For silver, however, the same procedure willproduce a solid (silver chloride) and asupernatant solution. You can analyse thesolution; or you can use an alternative acid,such as dilute nitric acid, to produce a limpidsolution and analyse that instead.

The Steering Committee selected 10laboratories and asked them to analyse the newsilver reference materials using whichevermethod they deemed acceptable. Two mainmethods were used, as I have just explained:either the nitric solution approach, where thematerial was dissolved in nitric acid and directlyanalysed; or the aqua regia approach, which isalso the ISO 15096 (2008 version) standard,where the material was dissolved in nitric acidand then hydrochloric acid was added toprecipitate AgCl and the supernatant wasanalysed.

Silver RMs Analysis –Representative ProblemsLet me show you which results were obtained.Figure 1 focuses on magnesium analysed insilver for RM1 and RM2. Each triangle is aresult given by a laboratory. There are morethan 10 of them because, as I said, laboratorieswere allowed to use several methods. Theresults were collated depending on the methodused for the preparation – using nitric acid,aqua regia or any alternative method. Theresults in blue were those that were accepted.The results in red were those that wererejected. Results were rejected either becausethe technique was deemed afterwards to beinappropriate or because they were outliersfollowing certain statistical tests that weperformed.

If we take magnesium, for example, we seethat the results obtained from nitric acid arepretty coherent, with all measurements veryclose to the average value. The same goes forhigher levels of magnesium. However, if wecheck the results from aqua regia, we see thatdispersion is much higher and the absolutevalue is also lower. This is explained by the factthat magnesium will adsorb in silver chlorideand obviously will lead to a lower absolutevalue.

If we take another trace element, platinum,we see the opposite trend. We have a goodresult in aqua regia and a larger dispersion,more outliers and results that give lower valuesin nitric acid. Again, this is not surprising. It iswell known that platinum dissolves pretty wellin aqua regia and not that easily in nitric acid.

Which Method to Use?When we saw those results, the first questionwas: could we just use the nitric acid results forsome elements and the aqua regia results forother elements? The short answer is,unfortunately, no. In nitric acid, we have someelements that are perfectly stable. Take copper:the sample is prepared at time zero, and since itusually takes two to three hours before analysisis performed, the first concentration is obtainedafter three hours. The solution is analysed againafter 18 hours, after 36 hours, and thiscontinues for four days, showing results that arecompletely consistent and do not change overtime. The same goes for certain elements suchas bismuth, antimony, zinc and so on.

However, if we take other elements, we seethat they are not as stable as we had hoped.Nickel, for example: starting with a value of 72ppm after three hours, it dropped to 60 ppmafter a day and half. The same trend occurswith several elements; indeed gold andrhodium will completely disappear after a dayand a half. The problem is that even if youmeasure that solution even after only two, threeor four hours, there is obviously a decrease, soyou cannot be sure that the concentration youare measuring is the real concentration. Let usbe honest, in daily work in the laboratory, ifyou lose one ppm of one of the trace elements,it is not such an issue, but for a referencematerial – something we want to be certified –this is obviously unacceptable.

Therefore, the conclusion for this first partis that, in nitric acid, we not only have asolubility problem, we also have some kineticissues to consider.

ISO 15096 StandardWe then tried the method ISO standard 15096,the latest 2008 version. As it is an ISO standardmethod, we expected this to work very well.The standard is intended for jewellery analysisof silver with purity higher than 999‰, butobviously it can be used for any silver alloy ofsufficient purity. The procedure isstraightforward: weigh a certain amount of thetest sample, dissolve it in nitric acid, heat it andthen add HCl to precipitate silver chloride.After filtration and washing of this precipitate,and addition of extra HCl, the liquid phase isanalysed by ICP-OES.

We used this procedure on the silverreference materials and several silver standardsthat we had made ourselves. Figure 2 showsthe recovery rate. Basically, if the method

A L C H E M I S T I S S U E S I X T Y T W O

page 3

Silver From analysis of Reference Materials to a new ISO StandardBy Jonathan J Jodry, Head, Trace Analysis Laboratory, Metalor Technologies SA

The following is an editedversion of a presentation madeat the Fourth LBMA Assaying

and Refining Seminar.

T H E L O N D O N B U L L I O N M A R K E T A S S O C I A T I O N

page 4

works, the result should be 100% for eachelement. The first thing we see is that thismethod absolutely does not work for fourelements: cadmium, lead, bismuth and rhodiumhave less than 10% recovery. This is a clear signthat those four elements cannot be measuredwith this ISO standard. In fact, not only thosefour, but most of the elements (15 out of 20),give results that are not really useable. If wetake iron, for example, we have a 70% recoveryrate, which means a 30% error. This shows thatthis approach is not applicable for the analysisof our silver standards.

What we found in the end was that someelements could neither be determined in nitricacid nor in aqua regia. This was the case forrhodium, which is an extremely difficultelement to measure in silver. Therefore, whatyou see here is that basically most of the resultsare completely out of range. But if you look atthe third part of the graphic called ‘othermethods’, it seems that this time, results aremore coherent.

A New Approach for the Analysis ofSilverDuring the course of this project, which lastedover more than a year, we had to develop a newmethod that would allow us to measure all theelements quantitatively.

We started with a partial dissolution innitric acid. Looking at the sample tubes, itappeared that the solutions could contain somesuspensions, which can be isolated bycentrifugation. This is more effective thanfiltration as there is no risk of contaminationand it produces a liquid phase that can beanalysed immediately. Then we dissolved thesolid residue in aqua regia and analysed thatsolution, too. For each element, the exactvalue is the sum of both analyses.

What results did we find? Gold is foundexclusively in the solid residue. Rhodium isfound mostly in the solid residue, at about80%. Many elements were found in bothsolutions, which means that they are presentboth in the nitric acid solution and in theresidue. Other elements were found almostexclusively in the nitric solution. While thisalso depends on their relative concentration, itstill gives a good idea of where elements can befound.

This method has three main advantages.There is no precipitate in the solution beinganalysed. Thus there is no problem with thecloaking of the ICP instruments and thesolution is significantly more stable over time: ifthere is no suspension, the solution beinganalysed will remain reasonably stable for acouple of hours.

The dissolution of the solid residue can beperformed under pressure. This is mandatoryfor quantitative measurement of rhodium. Ifyou do not use pressure, you will not dissolvemost of the rhodium.

This method is valid for elements that areonly partially dissolved, which was the big issuewith the two previously used methods.

51.6

46.8

49.9

49.0

48.2

46.5

51.5

46.3

52.2

51.5

40

42

44

46

48

50

52

54

56

58

[ppm

]

Mg (RM 2)

nitric acid aqua regia other methods

14.0

13.1 13

.7

13.6

14.4

13.1

14.8

14.8

14.0

7

8

9

10

11

12

13

14

15

16

[ppm

]

Mg (RM 1)

validated resultsrejected results

Figure 1 - A representative problem in silver RM analysis

Figure 2 - ISO 15096 Standard Recovery Rate

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T H E L O N D O N B U L L I O N M A R K E T A S S O C I A T I O N

page 6

Recovery Rates Figure 3 (ISO standard in blue as in Figure 2)shows the results we obtained following theISO standard, compared with the results weobtained with this new method. You can seethat we went from 15 out of 20 elements thatwere not of acceptable accuracy, to 16 out of20 giving results of plus or minus 7% relativeto the target concentration. We have evenimproved the method further recently: ironwas a little high due to contamination from thepressure vessel, but we have now foundalternatives to prevent that.

This method is precise, and most of theresults we obtained for the reference materialswere accurate with this approach. Of course,this is one technique we developed at Metalor.We have shared it with other members of theSteering Committee, some of them use it,others use their own technique, so it is notnecessarily the best technique around, but wehave found it effective and relativelystraightforward to conduct.

ConclusionIn conclusion, the silver reference materials areimportant in themselves as the first silverreference materials ever made. However, Ithink it is even more important that we learneda great deal about the analysis of silver,improving our techniques in the process. Nowwe have an approach to silver analysis that iscompletely different and, we believe, muchmore effective.

The main point is that you can only getgood, validated results if you use a combinationof two methods. Of course, it takes a little bitmore time. You do not need to use thisapproach for daily analysis, but if you wantprecise results, this is the way to go.At the ISO level, we have seen that the ISO15096 standard (2008 version) is simply notapplicable for complex silver samples. In fact,it is basically not applicable for any silversamples. Therefore, we are now working with

the technical committee handling the standardand we expect to approve a new standard usingthe method I have described today.

AcknowledgementsI would like to finish with someacknowledgements. First, Dr Paul Bagnoud – Ithink many of you know him. He retired fromMetalor last year, but he initiated this projectand his contribution here was tremendous.

I would like also to thank my team,especially Quentin Bochud, our new engineer,who spent three months working exclusivelyon silver analysis from morning to evening. We

have these results because of his work. Theother team members, Cyril, Annik and Estelle,also did a great deal of analysis out of workinghours to help us to advance.

I would like to thank all members of thesilver Steering Committee, especially MikeHinds. It was extremely interesting to worktogether at a scientific level, even if some of thecompanies are competitors. We were able toshare detailed scientific knowledge and I thinkthat we all improved our analysis techniques inthe process, and will continue to do so. Finally,I would like to thank the LBMA for organisingthe project and this seminar. n

Jonathan J Jodrygot his PhD at theUniversity of Genevain 2000 in organic andsupramolecularchemistry; he movedthen to Japan to theTokyo Institute ofTechnology as a JSPS

post-doctoral fellowship in the field ofcatalysis and ionic liquids, before joiningCentral Glass, a Japanese company thatspecialises in fluorine chemistry, where hewas responsible for development, scale-upand analysis of organic materials used by thesemi-conductor industry. He finally cameback to Switzerland and, in 2009, joinedMetalor Technologies at Neuchâtel, where heis now head of the trace analysis laboratory.

Figure 3 - Recovery Rate using new method vs ISO method

L B M A G O L D A N DS I LV E R R E F E N C EM AT E R I A L SGold Reference MaterialsElement Au-RM1 Au-RM2Ag 20±10 100±50Al 10±5 30±15As 12±6 40±20Bi 30±15 10±5Ca 10±5 30±15Cr 10±5 30±15Cu 10±5 30±15Fe 10±5 30±15Mg 30±15 10±5Mn 10±5 30±15Ni 10±5 30±15Pb 10±5 30±15Pd 10±5 30±15Pt 10±5 30±15Rh 10±5 30±15Sb 30±15 10±5Se 12±6 40±20Si 10±5 30±15Sn 10±5 30±15Te 40±20 12±6Ti 10±5 30±15Zn 10±5 30±15

Contact the Executive for further details andordering information. For gold, there willbe a difference of at least 10 ppm betweenthe concentrations in RM1 and RM2.

Silver Reference MaterialsElement Ag-RM1 Ag-RM2Al 5-10 20-40As 20-40 5-10Au 5-10 20-40Bi 10 50Cd 5-10 20-40Cr 5-10 20-40Cu 20 100Fe 5-10 20-40Mg 20-40 5-10Mn 5-10 20-40Ni 5-10 20-40Pb 50 10Pd 5-10 20-40Pt 5-10 20-40Rh 5-10 20-40Sb 5-10 20-40Se 20-40 5-10Si 5-10 20-40Sn 20-40 5-10Te 5-10 20-40Zn 20-40 5-10

A L C H E M I S T I S S U E S I X T Y T W O

page 7

The National Physical Laboratory

(NPL) is the UK’s National

Measurement Institute and has

been managed on behalf of the

Government by a company called

Serco for 16 years. The NPL was

formed in 1900 and is one of the

top three such institutes in the

world. A prime function for the

NPL is to ensure that

measurements made in the UK

are equivalent to those made in

the rest of the world. Every

developed country has an

equivalent organisation.

This manifests itself in many ways, fromfacilitating trade through ensuring somethingweighed or measured has the correct valueassociated with it (ie weighing a bag of sugar ortrading commodities), through to things likethe measurement of the temperature of theearth through satellite observation; making surethat the temperature measured by one satellitesystems is equivalent to that measured byanother.

Measurement is easy?Measurement is easy, is it not? We all have aruler, we all have scales we weigh ourselves onin the morning. If you were to go back 2,000years, the Romans could do measurement –they were very good at it – it facilitatedengineering achievements that remain

impressive even by modernstandards. An example of this isthe water system built to takewater to Nimes in France.Over a 50 km distance theheight of the waterway changesby less than 17 metres, includingthe construction of aquaducts suchas the Pont du Gard. To get thesurveying right, to actually get the water toflow in the right direction over the wholecourse of it, remains impressive.

Indeed even earlier than the Romans, theEgyptians were using measurement to greateffect, for example in the construction of thepyramids. However, to underestimate thedifficulty of measurement is to ask forproblems. In the 20th century the LaufenburgBridge was constructed between Germany andSwitzerland, both extremely impressive, leadingengineering countries. Unfortunately when theconstruction teams reached the middle therewas a 54 cm difference in height between thetwo halves of the bridge. In the UK, about fiveyears ago, a survey of blood pressuremeasurement was carried out in southeastLondon: about 30% of all the measurementswere actually incorrect, and not incorrect by asubtle amount. They were incorrect by anamount that meant people were gettingincorrect medication. So, it is important thatpeople get measurement right, even insomething where it looks routine. It is veryeasy to become complacent about whether ameasurement is correct or not.

The Measurement System in the UKThe National Measurement Office, on behalf ofthe Department for Business, Innovation andSkills, funds four different organisations todeliver the core of the UK Measurementsystem, shown in Figure 1.

Mass measurement lies within the scope ofphysical measurement and the UK’s mass scale

is derived from NPL, where the nationalmass standard (kilogram 18) is held.

Once NPL has realised the mass scaleit is disseminated throughout the UKeither directly to industrial users orvia accredited laboratories. The

United Kingdom Accreditation Service(UKAS) is responsible for ensuring that

these accredited laboratories are competent toperform measurements in an appropriatemanner.

There has been a lot of investment overmany years into this accreditation system, and itis, by definition, the way that all massmeasurements should be traceable. Mass is alsointeresting as it is a base unit meaning thatother units of measurement are derived fromit, such as pressure, humidity and force. So, wealso calibrate items to facilitate that.

The exception to the traceability routeoutlined above is weights used for tradingpurposes (legal metrology). In this case thedissemination happens from NPL via theNational Measurement Office.

Users of MeasurementWho uses measurement? Industry: for example,a company like Rolls Royce, building jetengines, needs to know that the parts fittogether and align correctly, and that theturbine blades are not going to melt in theengine. In medicine NPL provides traceablemeasurements throughout all the radiographydepartments in the UK, where cancer is beingtreated with very precise radiation doses. Afurther example is in Health and Safety whereit is vital to know if a cable used to tether an oilrig can withstand the force that will be exertedon it.

In Europe, it is estimated that between 2%and 7% of gross domestic product is directlyrelated to measurement. It is absolutely a keyparameter, and it is essential that everybodygets it right.

Mass Measurements in the UK What’s in a kilogram?By Dr Ian Severn, Head, Engineering Measurement, NPL

The following is an editedversion of a presentation madeat the Fourth LBMA Assaying

and Refining Seminar.

Organisation Measurement Areas

National Physical Laboratory Physical and Biological

Laboratory of the Government Chemist Chemical and Biological

National Engineering Laboratory Flow

National Measurement Office Legal Metrology

It is very

easy to become

complacent

Figure 1 - Measurement Organisations

T H E L O N D O N B U L L I O N M A R K E T A S S O C I A T I O N

page 8

Mass MeasurementToday, the situation for dissemination of massmeasurements in the UK is virtually identicalto that of all the other industrialised countriesin the world.

The kilogramFigure 2 shows the International Prototype ofthe kilogram (a weight that is defined to weighexactly 1 kilogram and from which the mass ofall other weights in the world are derived). Itis a cylinder of platinum-iridium that is kept ina vault just outside Paris under two bell jars, toprotect it from atmospheric contamination.Around the world, there are about 90 copies ofthis kilogram. They were made somewherebetween 1880 and 2000, in three or fourdifferent batches.

This definition of the kilogram dates back tothe late 19th century when scientists whereseeking practical ways to define the basicmeasurement units. Considerable thought wasgiven to the choice of artefact in order to makeit as stable as possible:

Shape – The international prototype of thekilogram is a cylinder of height equal to itsdiameter (about 39 mm). With the exceptionof a sphere, which would be difficult to handlein a safe manner, this shape represents theminimum surface area for a given volume ofmaterial. This minimises the chance ofcontamination on the weight.

Material – Platinum iridium was chosen asit is chemically unreactive and it is dense – sominimising the volume and hence surface areaof the weight. It should also be noted that analloy of platinum-iridium is used as this is muchharder than pure platinum. This is important ifthe weight is to avoid being damaged in use.The material for most of these platinum-iridium kilograms was manufactured at JohnsonMatthey in London.

This definition has served us well for over100 years, but it is not as robust as thedefinitions of other base measurement units(such as the metre or the second) which arebased on fundamental scientific constants (egthe speed of light). The definition means thatany change in the mass of the internationalprototype of the kilogram would change thevalue of all of the mass scales in the world.Figure 2 shows how the mass of other copies ofthe kilogram have varied relative to theinternational prototype. There has been a 50microgram, or 50 parts in a billion relativechange. Given that these copies were made atthe same time as the international prototypeusing the same production methods, there is nosound reason why there should be significantchanges in their relative values. If you areweighing pharmaceuticals or if you aremeasuring very large forces, such as the sortthat tether oilrigs, these uncertainties anderrors extrapolate and grow. So theseanomalies are important.

In the UK, we have three official copies andan unofficial copy of the kilogram, which allowsus to ensure that our copy of the kilogram isnot changing mass relative to the others.

Improving DefinitionsThere is a requirement to improve how wedefine mass. Our current method is goodenough for industrial practice becauseeverything is consistent. This is the wholepurpose of having an organisation like the NPL.It makes sure that the measurements made inthe United States are equivalent to those inGermany, the UK, France, Malaysia, wherever.However, it does not mean that it is right; itjust means we all get the same answer becausewe use the same methods.

It is worth noting that we believe the UK’skilogram has been stable to within 14micrograms – 14 parts per billion – over thelast 100 years. The weight gets dirty eventhough we keep it in a glass bell jar with afiltered air inlet. It is just an aspect that metalgains weight, as you store it in air, because itgets contaminated. We have systems here wecan use to clean this and always have aconsistent answer. If you look at most of theweights that have been kept within Europe andNorth America, they are of a similarperformance to that of the UK.

Redefining the kilogramWithin the next five to 10 years, the kilogramwill be redefined, and it will be redefined interms of a constant of nature, probably Planck’sConstant. This will remove the reliance on asingle artefact that could change over time.There are two ways that this can be done:

Silicon-based kilogramOne of these methods is to use a known weightsuch as an atom of silicon. If you have enough

atoms, you can make a kilogram. So, if you canmeasure the volume of a sphere made frompure silicon and know all about its surface andknow the spacing between the silicon atoms,you can define a kilogram in those terms. It isactually very difficult to do, and work (throughan international consortium) has been inprogress on this for 20 or 30 years.

An electrical kilogramAnother possibility, which we at NPL like,because we invented the method, is that youcan balance the gravitational force on a weightagainst an electrical force. The electrical forceis analogous to an electric motor. A currentflows through a wire wrapped around a magnetthat generates a force. We know the electricalunit of current and we can measure magneticfields – or actually we can cancel them out –very well. So, if you can balance that electricalforce with a gravitational force, you can definethe kilogram in terms of that. This is likely tobe the method adopted to redefine thekilogram within the next five years.

There are around five different experimentsaround the world looking into this. The reasonit cannot be redefined at the moment is that,whilst we can achieve quite low uncertainties,they do not agree. We are pursuingexperimentation to make sure that the differentexperiments come together and establish whatthe true value is. This will probably happensomewhere around 2015-18.

Concluding RemarksThe measurement procedures for preciousmetals are fine in terms of where they are now,and they have evolved to where they are nowsuch that the requirements in terms of theuncertainty you can achieve in a measurement,the potential error in that measurement, arevery closely linked to the technologies used inthe weighing process.

The one warning I would give is that if, allof a sudden, you improve one parameter or onemethod in this – say, for example, you go anduse improved balances (which are available) –there is a real risk that you think you are doingthings with lower measurement uncertaintiesthan you actually are. When you compareplatinum-iridium with a stainless steel weight,it will depend on the density of the air at thetime. In the UK, the density changes by about10% during the year. So, you will get adifferent answer in the summer, when thepressure is high, than in the winter, when theair pressure is lower unless, you makeappropriate corrections. The same is also trueif you compare gold with stainless steelweights. As you move to better weighingtechnologies, you need to take into accountthese other effects, or you could create aproblem going forward. It is just a question ofbeing aware of that and making corrections.

Figure 2 - International prototypeof the kilogram

A L C H E M I S T I S S U E S I X T Y T W O

page 9

LBMA Precious Metals Conference 2011in association with the LPPMLe Centre Sheraton Montreal, 18-20 September 2011 www.lppm.com www.lbma.org.uk

After three years of historic highs, where nowfor investors? Where does Asian spending powercome from? How will new industrial demandaffect the markets and will increasing regulationhold them back?

For answers to these and other topical questions,mark your diaries for the twelfth annual LBMAconference, held this year in association with theLPPM.

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Questions and AnswersStewart MurrayIn the bullion market, we use beam balancesand we also use electronic scales. Will the effectthat you mention of different air densities affectboth of these equally or one more than theother?

Dr Ian SevernBoth equally. The key thing is the difference involume or density between the standard withwhich the electronic balance was calibrated andthe density of the item you are weighing, so inyour case, gold, which is of course much moredense than steel. There is nothing wrong withthe procedures at the moment. I suspect that,as with most procedures, they have evolved to acommon well-defined place.

Stewart MurrayWhat is the difference that you could getbetween the highest and the lowest air pressure,weighing something like a 400 troy ounce goldbar? Are we in the eighth or ninth significantfigure?

Dr Ian SevernNo, it is fewer significant figures than that. Itis going to be at the fourth or fifth significantfigure, potentially – perhaps fifth or sixth.

The other thing that you have to bear inmind that as you are at different altitudes, theair density changes even more betweenlocations. For example, in the UK, the typicalair density is about, ignoring the units, 1.2. InMadrid, it is typically about 1.02. So, there is ahuge change: 20% or more.

Stewart MurrayWhen you have got an electronic scale and youtake it to Madrid or Colorado, do themanufacturers correct for the altitude and thedifferent gravity in these different places?

Dr Ian SevernIt actually does not matter in terms of thegravity and the altitude: because if you calibratethe scale using a weight in the same location, itall cancels out. So, electronic balances workwell wherever; it is just about being aware ofthe more subtle effects like buoyancy and theair density that are the key things.

Gareth Owen-Jones (Sartorius UK)It really becomes an issue if you move thebalance from one place to another, because ifyou weighed something here and then took thebalance to Mexico City and did not calibrate it,there would be an enormous difference.

ParticipantIf you weigh something in your own part of theworld and then you compare the weight to theLBMA, according to their assaying and theirweighing balances, would that have adifference?Dr Ian SevernAs long as weighing is done correctly, gravityshould not make any difference. Whether youare using a two-pound balance or an electronicbalance, gravity is compensated for by theweighing process, as long as it is done correctly.The particularly important thing is that theelectronic balance should be calibrated in thelocation where it is going to be used. If that isdone, then there should not be a problem. n

Ian Severn is head of the EngineeringMeasurement Division at the NationalPhysical Laboratory, the United Kingdom'snational measurement institute. He startedhis career there 20 years ago as a massmetrology specialist and became Head of theMass and Density Group. The area he headsincludes responsibility for the realisation ofthe UK measurement scales associated withlength, mass, temperature and opticalradiation.

The LBMAAnnual Party

at Circus, Covent Garden, started

on a high note and went with a

swing. Acrobatic performances were

enjoyed by Members and Associates and

some demonstrated their own skills...

More photographs can be seen in

the Members’ area of the

LBMA website.

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page 12

What do Academics Think They KnowAbout Gold? By Brian M Lucey, Associate Professor of Finance, School of Business Studies, Trinity College Dublin

Over the last decade, gold and

other precious metals have been

on a remarkable run. In February

2001, when I became interested in

the properties of gold as a

financial asset, gold stood at

about $260 per oz, compared to its

price now in the region of $1,500

– a remarkable, sustained and

intriguing bull run.

The purpose of this note is to give readers aninsight into what academics (think they) knowabout the economic and financial aspect of thegold market, and therein to perhaps set up whatI hope to be a debate on how industry andacademia can work together better to gain agreater understanding. There are, as we shallsee, relatively few academics working on thegold market. This is puzzling, especially whenwe compare the torrent of papers that rightlyhave been published on equity, bond andcurrency markets. To a great extent, theresearch being carried out on gold is ‘in house’and in what is called ‘grey’ literature. That doesnot make it any more or less higher quality thanpeer-reviewed academic papers, but it does bega question as to why. One common responsethat I and others who do research on gold getfrom fellow academics is, “but why, isn’t thatthe realm of conspiracy theorists and theextreme right”. It’s fair to say that theacademic, and more generally the researchcommunity on gold has not managed topersuade the wider community that its work isworthy of attention.

One issue that confronts the researcherwhen searching bibliographic databases (themain bibliographic databases for academiceconomic and financial researchers would beEconlit, Scopus and SSRN) is that gold appearsas a major research trend in at least threediscrete areas. These are the economic andfinancial aspects of gold (the focus here), goldas a currency (the gold standard, bimetallism

and historical uses of the metal), and the natureand impact of gold mining on the environmentand on society. Focusing on the first is not to inany way downplay the importance of the othertwo, but merely to provide a framingfor the discussion. In total, closeto 700 papers have beenpublished on these areas since1990. Restricting this furtherto academic papers on theinvestment and economicaspects of gold, I was able toidentify approximately 200papers in the area. A fullbibliography is available by email,but a number of trends emerge.

First, there has been a remarkableexplosion in research on gold in the lastnumber of years. Of the 186 papers I havecollated, 26 were published in 2010 or the firstquarter of 2011, with a further 40 published in2008-2009. Given that academic paperstypically take six months or more to go fromidea to final publication, this indicates that,since 2008, a major research shift has takenplace. The implication of this is that the time isnow ripe for greater market-academicintervention in a structured manner. In thisissue of the Alchemist, we see a potential modelfor this, with the announcement of the LBMABursary, a PhD bursary in the economics andfinance of the gold market. This model, if morewidely adopted, would result within three tofive years in the generation of a large body ofresearch on aspects of the market of concern tothe industry, the influx into the industry ofhigh-quality researchers trained to the highestmodern standard in economics and finance, andthe further mainstreaming of gold marketresearch.

Second, there are clear trends in the authorand citation patterns, with a relatively smallnumber of authors contributing the mostheavily cited and downloaded papers. Thuswhile there is a growth in the literature, itremains concentrated.

Third, there are a number of commontrends in the literature in terms of the locus ofinvestigation. The main areas of academicresearch are gold as a diversifier, as a hedgeagainst inflation or other assets, and theefficiency of the operation of the gold market.So what do academics know (or think that theyknow) about these issues?

Perhaps the most studied area is the role andweighting that gold might have in a portfolio.Sherman (1982) suggested a weighting of 5% inan equity portfolio resulted in lower risk and

higher return, while weighting as high as25% has been proposed by Chua

(1990), mainly down to the then lowor negative correlation betweengold and equities. More recentresearch by Hillier, Draper et al(2006) suggests weights in thesmall percentages for a variety ofprecious metals, with gold acting as

the most efficient diversifier.Considering gold and oil together,

Bruno and Chincarini (2010) suggest aweight of 10% for non-US based investors

seeking portfolio diversification, while Scherer(2009) for sovereign wealth funds and Klementand Longchamp (2010) for high net worthindividuals suggest an allocation in the range of5% to 10% by weight to gold in an equityportfolio.

Much of the attractiveness of gold, onreading these and related papers, comes fromits low correlation combined with its positiveskewness, where there is a greater chance of a,say, 1% rise in one day than there is a 1% fall inany one day. Examining this and explicitlynoting that this provides downside risk, Lucey,Poti et al. (2006) examine portfolio choicewhere the investor is concerned with suchdownside protection and find an optimal weightof between 6% to 25%, depending on the timeperiod and the other (mainly equity) assetsincluded.

The combination of low or negativecorrelation and high positive skewness also hasbegun to attract attention. An asset withlow/negative correlation might well act as anatural hedge, while the skewness elementmight suggest safe-haven properties. However,a hedge asset may not provide safe-haven status.These have been explicitly examined in recentyears, with Baur and Lucey (2010) providingthe first statistical test of when gold acts as asafe haven and when as a hedge, with Baur andMcDermott (2010) extending this to morecountries. They find that while gold acts onaverage as a hedge against equities, it does notdo so against bonds, but that it can and does actas a safe haven for bonds as well as stocks,extending its usefulness to investors beyondequity investors.

There

has been a

remarkable explosion

in research on gold in

the last number

of years.

A L C H E M I S T I S S U E S I X T Y T W O

page 13

The LBMA is delighted tocongratulate Mr Fergal O’Connor,the recipient of the first LBMA PhDbursary at Trinity College Dublin. Fergal holds an MSc in financial economics fromUniversity College Cork, where he has alsolectured. His precious metals research interestsinclude the OTC market, pricing precious metalderivatives and hedges and havens. He willundertake his research with Professor Brian Luceyat Trinity College, Dublin.

The LBMA Executive will organise a series ofmeetings during the summer so that he can hearmore about the bullion market and the interests ofLBMA Members.

There is of course a long and detailedresearch tradition examining gold as aninflation and dollar hedge, with majorcontributions from Fortune (1987), Moore(1990), Taylor (1998), Ghosh, E. J. Levin et al.(2004), Worthington and Pahlavani (2007) andmore recently Blose (2010) and Wang, Lee etal. (2010) on the hedging potential for goldagainst inflation, and by Johnson and Soenen(1997), Capie, Mills et al. (2005), Tully andLucey (2007), Sjaastad (2008), Hammoudeh,Sari et al. (2009) and Sari, Hammoudeh et al.(2010) against the dollar. The general evidenceis that while it can act as a useful diversifier, thisis a long-run phenomena and comes at the costof increased short-run volatility. There is alsovery significant evidence that these relationshipsare quite unstable over time, with slowreversion to the norm.

Much work has also been undertaken byacademic researchers on a wide variety ofaspects of the operation and efficiency of thegold market. Thus, from Solt andSwanson (1981) through to Diba andGrossman (1984), Ma and Sorensen (1988),Aggarwal and Soenen (1988), Lucey andTully (2006), Aggarwal and Lucey (2007) andmore recently Tully and Lucey (2007) andLucey (2010), we find significant evidence thatthe gold market is not efficient, in the sensethat there may be exploitable anomalousbehaviour. At a more operational level, Bakerand Van-Tassel (1985), Tandon andUrich (1987), Ding, Granger et al. (1993),Byers and Peel (2001), Matsushita, Da Silva et

al. (2006), Tully and Lucey (2007) and Khalifa,Miao et al. (2011) find that shocks to the goldprice take a very long time to dissipate.

The relationships between the variousprecious metal markets have been examined byMa (1985), Escribano and Granger (1998),Ciner (2001), Lucey and Tully (2006) andHammoudeh, Sari et al. (2009), with thegeneral finding being that there is no strongevidence of long-run stability in therelationship. The effect of macroeconomicinformation on gold has been examined byTandon and Urich (1987), Christie-David,Chaudhry et al. (2000), Tully and Lucey(2007), Batten, Ciner et al. (2010) and Roacheand Rossi (2010), who find two stylised facts:first, the dollar-gold relationship is strong; andsecond, there is no consistent set ofmacroeconomic factors that appear to influenceall precious metal markets in a similar manner.The relationship between gold and oil hasrecently attracted attention, with Baffes (2007),Sari, Hammoudeh et al. (2007), Cheng, Su etal. (2009), and Zhang and Wei (2010) findingmixed evidence as to the influence of oil ongold and vice versa.

Overall, therefore, there is a rich andrapidly growing body of research on the goldmarket. The research remains small scale,compared to the work on equities or bonds orFX, which is not representative of theimportance of the precious metal marketsactually or prospectively. n

See next page for references.

Brian M Lucey is a professor of finance atthe School of Business at Trinity CollegeDublin, where he is director of the MScFinance programme. He studied at graduatelevel in Canada, Ireland and Scotland, andholds a PhD from the University of Stirling.His research interests include internationalasset market integration and contagion;financial market efficiency, particularly asmeasured by calendar anomalies; and thepsychology of economics.

LBMA PhD Bursary

Ruth Crowell, LBMA Commercial Directorand Professor Lucey celebrate the awardof the bursary

T H E L O N D O N B U L L I O N M A R K E T A S S O C I A T I O N

References

Aggarwal, R. and B. M. Lucey (2007). "Psychological Barriers in GoldPrices?" Review of Financial Economics 16(2): 217-30.

Aggarwal, R. and L. Soenen (1988). "The nature and efficiency of thegold market." Journal of Portfolio Management 14(3): 18-21.

Baffes, J. (2007). "Oil spills on other commodities." Resources Policy32(3): 126-134.

Baker, S. A., and R. C. Van-Tassel (1985). "Forecasting the Price of Gold:A Fundamentist Approach." Atlantic Economic Journal 13(4): 43-52.

Batten, J. A., C. Ciner and B. M. Lucey (2010). "The MacroeconomicDeterminants of Volatility in Precious Metals Markets." ResourcesPolicy 35(2): 65-71.

Baur, D. G. and B. M. Lucey (2010). "Is Gold a Hedge or a Safe Haven?An Analysis of Stocks, Bonds and Gold." Financial Review 45(2):217-29.

Baur, D. G. and T. K. McDermott (2010). "Is gold a safe haven?International evidence." Journal of Banking and Finance 34(8):1886-1898.

Blose, L. E. (2010). "Gold Prices, Cost of Carry, and ExpectedInflation." Journal of Economics and Business 62(1): 35-47.

Bruno, S. and L. Chincarini (2010). "A Historical Examination ofOptimal Real Return Portfolios for Non-US Investors." Review ofFinancial Economics 19(4): 161-78.

Byers, J. D. and D. A. Peel (2001). "Volatility Persistence in AssetMarkets: Long Memory in High/Low Prices." Applied FinancialEconomics 11(3): 253-60.

Capie, F., T. C. Mills and G. Wood (2005). "Gold as a hedge against thedollar." Journal of International Financial Markets, Institutions andMoney 15(4): 343-352.

Cheng, W.-H., J.-B. Su and Y.-P. Tzou (2009). "Value-at-Risk Forecasts inGold Market under Oil Shocks." Middle Eastern Finance andEconomics(4): 48-64.

Christie-David, R., M. Chaudhry and T. W. Koch (2000). "DoMacroeconomics News Releases Affect Gold and Silver Prices?"Journal of Economics and Business 52(5): 405-21.

Chua, J., G. Stick, and R. Woodward (1990). "Diversifying with GoldStocks." Financial Analysts Journal 46: 76-79.

Ciner, C. (2001). "On the Long Run Relationship between Gold andSilver Prices: A Note." Global Finance Journal 12(2): 299-303.

Diba, B. and H. Grossman (1984). "Rational Bubbles in the Price ofGold." NBER Working Paper: 1300. Cambridge, MA, NationalBureau of Economic Research.

Ding, Z., C. W. J. Granger and R. F. Engle (1993). "Long memoryproperty of stock market returns and a new model." Journal ofEmpirical Finance 1: 83-106.

Escribano, A. and C. W. J. Granger (1998). "Investigating the relationshipbetween gold and silver prices." Journal of Forecasting 17(2): 81-107.

Fortune, J. N. (1987). "The Inflation Rate of the Price of Gold, ExpectedPrices and Interest Rates." Journal of Macroeconomics 9(1): 71-82.

Ghosh, D., E. J. Levin, P. Macmillan and R. E. Wright (2004). "Gold asan Inflation Hedge." Studies in Economics and Finance 22: 1-25.

Hammoudeh, S., R. Sari and B. T. Ewing (2009). "Relationships amongstrategic commodities and with financial variables: A new look."Contemporary Economic Policy 27(2): 251-264.

Hillier, D., P. Draper and R. Faff (2006). "Do precious metals shine? Aninvestment perspective." Financial Analysts Journal 62(2): 98-106.

Johnson, R. S. and L. A. Soenen (1997). "Gold as an investment asset -perspectives from different countries." Journal of Investing 6(3):94-99.

Khalifa, A. A. A., H. Miao and S. Ramchander (2011). "ReturnDistributions and Volatility Forecasting in Metal Futures Markets:Evidence from Gold, Silver, and Copper." Journal of FuturesMarkets 31(1): 55-80.

Klement, J. and Y. Longchamp (2010). "Managing currency risks forglobal families." Journal of Wealth Management 13(2): 76-87.

Lucey, B. M. (2010). "Lunar seasonality in precious metal returns?"Applied Economics Letters 17(9): 835-838.

Lucey, B. M., V. Poti and E. Tully (2006). "International PortfolioFormation, Skewness and the Role of Gold." Frontiers in Financeand Economics 3(1): 49-68.

Lucey, B. M. and E. Tully (2006). "The Evolving Relationship betweenGold and Silver 1978-2002: Evidence from a DynamicCointegration Analysis: A Note." Applied Financial EconomicsLetters 2(1): 47-53.

Lucey, B. M. and E. Tully (2006). "Seasonality, Risk and Return in DailyCOMEX Gold and Silver Data 1982-2002." Applied FinancialEconomics 16(4): 319-33.

Ma, C. (1985). "Spreading between the gold and silver markets - is therea parity?" Journal of Futures Markets 5: 579-593.

Ma, C. and L. Sorensen (1988). "Arbitrage opportunities in metal futuresmarkets." Journal of Futures Markets 8: 199-209.

Matsushita, R., S. Da Silva, A. Figueiredo and I. Gleria (2006). "Log-periodic crashes revisited." Physica A: Statistical Mechanics and itsApplications 364: 331-335.

Moore, G. H. (1990). "Gold Prices as a Leading Index of Inflation."Challenge 33: 52-56.

Roache, S. K. and M. Rossi (2010). "The Effects of Economic News onCommodity Prices." Quarterly Review of Economics and Finance50(3): 377-85.

Sari, R., S. Hammoudeh and B. T. Ewing (2007). "Dynamic relationshipsbetween oil and metal commodity futures prices." Geopolitics ofEnergy 29(7): 2-13.

Sari, R., S. Hammoudeh and U. Soytas (2010). "Dynamics of Oil Price,Precious Metal Prices, and Exchange Rate." Energy Economics32(2): 351-62.

Scherer, B. (2009). "A note on portfolio choice for sovereign wealthfunds." Financial Markets and Portfolio Management 23(3): 315-327.

Sherman, E. (1982). "Gold: A Conservative, Prudent Diversifier."Journal of Portfolio Management Spring: 21-27.

Sjaastad, L. A. (2008). "The price of gold and the exchange rates: Onceagain." Resources Policy 33(2): 118-124.

Solt, M. and P. Swanson (1981). "On the efficiency of the Markets forGold and Silver." Journal of Business 54(3): 453-478.

Tandon, K. and T. Urich (1987). "International Market Response toAnnouncements of US Macroeconomic Data." Journal ofInternational Money and Finance 6(1): 71-84.

Taylor, N. J. (1998). "Precious metals and inflation." Applied FinancialEconomics 8(2): 201-210.

Tully, E. and B. M. Lucey (2007). "A Power GARCH Examination of theGold Market." Research in International Business and Finance21(2): 316-25.

Wang, K. M., Y. M. Lee and T. B. N. Thi (2010). "Time and place wheregold acts as an inflation hedge: An application of long-run andshort-run threshold model." Economic Modelling.

Worthington, A. C. and M. Pahlavani (2007). "Gold investment as aninflationary hedge: Cointegration evidence with allowance forendogenous structural breaks." Applied Financial EconomicsLetters 3(4): 259-262.

Zhang, Y.-J. and Y.-M. Wei (2010). "The Crude Oil Market and the GoldMarket: Evidence for Cointegration, Causality and PriceDiscovery." Resources Policy 35(3): 168-77.

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Not Seeking Perfection A confusion of aims in Good DeliveryBy Stewart Murray, Chief Executive, LBMA

George Orwell, in his essay

REFLECTIONS ON GANDHI, suggested

that “the essence of being human

is that one does not seek

perfection”. This also applies to

Good Delivery bars.

In recent years, there has been an increasinglevel of interest in the physical quality of thelarge bars, both gold and silver, which areacceptable for storage in the vaults of theLondon bullion market. Some of these barsmay reside in the vaults for only a short periodbefore being sent to refineries for conversioninto smaller bars (e.g. gold kilobars) or tofabricators for conversion into coins, jewellery,silverware or products for the electrical andelectronic industries. However, in recentyears, an increasing number of bars have beenaccumulating in the vaults because of theresurgent interest in precious metals on thepart of investors. These investors are of varioustypes. They include official sector participants,i.e. central banks, as well as private sectorinvestors such as institutions, exchange tradedfunds and high net worth individuals. Themetal purchased by many of these investors isheld on an allocated basis, which means thatindividual bars are allocated to the investorwho is then the owner of that bar. This is incontrast to the unallocated holding of preciousmetals where the investor merely has anentitlement to a certain number of troy ounceswith the gold or silver being physically held bythe bank or financial institution which isproviding the account. It is perhaps thisphysical ownership of Good Delivery bars byinvestors, even though the bars are held by thevarious professional custodians in the Londonmarket, that has brought the question of barquality to the fore. This was reflected in theprogramme for the recent LBMA Assaying andRefining Seminar in London. This includedtwo presentations on physical quality, one froma vault perspective by Tony Evanson of Barclaysand the other from a refiner’s perspective bySerge Gambs (now a consultant who formerlyworked for Metalor in Neuchâtel).

The LBMA’s recent publication on thehistory of the Gold Good Delivery List back to

1750 showed how the rules on physical barquality have evolved. It is not so much that therequired standards have been raised, but ratherthat more and more words have been used toexplain what is acceptable and what is not. Thefundamental requirements for a Good Deliverybar have not changed at all and can be statedrather simply. Bars should be:l safe to handle (i.e. no sharp edges);l securely stackable (flat bottom surfaces, nowedge-shaped bars);l of constant weight (e.g. no friable sharpedges which can cause a loss of metal orexcessively indented marks or cavities whichcan cause an accumulation of dust, etc.);l free from significant cracks, especially thosethat could indicate the presence of an internalcavity where water could be trapped;l free from holes for the same reason; andfree from layering (horizontal striations on thesides), though minor amounts oflayering can be tolerated.

In relation to themarkings, these have to:l be clear andunambiguous;l be durable in terms ofhandling in the vault;show the fineness to foursignificant figures (in thecase of gold); andl allow the bar to be uniquelyidentified (using a combination of thecompany’s logo, the bar number and, ifseparate, the year.

Bars that conform to the aboverequirements will be accepted in the Londonmarkets as long as they have been produced bya refiner that is accredited by the LBMA andwhose name and bars are included in thecurrent version of the Good Delivery List.

The vault managers in the London systemeach have a responsibility to their owners toensure that all the bars they accept for storagewill meet the LBMA’s physical requirements.In other words, they will reject bars that aredefective. The immediate question is what is adefect (which we may define here as being aphysical feature that is likely to result in a barbeing rejected by a vault manager) and what isan imperfection (namely a minor deviationfrom what might be regarded as a totallyperfect bar). Another term – ‘artefact’ – is alsouseful here. The dictionary definition of anartefact is something man-made. Some

artefacts merely reflect the fact that metals arecrystalline. For instance, when high-puritygold is cooled slowly, large individual crystalscan often be seen on the top surface, leadingsome observers to conclude (wrongly) thatthey are some kind of defect.

Modern refiners generally take great care inthe casting of their bars, but it is unfortunatelya fact that some of the gold bars cast manyyears ago, particularly in the inter-war periodin the United States, suffered from the fact thatthe refinery managers were under pressure torecast huge quantities of imported gold and thestandards of quality control during the castingoperation often suffered accordingly.

Today, many refiners take great pride inproducing bars that are almost of jewelleryquality – perfectly flat sides and bottomsurface, with almost no discernible shrinkageon the top surface and a complete absence of

the smallest imperfection. But this doesnot of course represent the

minimum requirement that aGood Delivery bar must meet.Rather, GD bars are mass-produced articles, used as ameans of storing value, andmust therefore meet the basic

requirements listed above. Aslong as the bars do satisfy these

requirements, the vault managersin London will exercise pragmatism in

deciding which small imperfections will betolerated. There is no need for gold and silverbars to look as if they had been produced byFabergé.

The process of producing a Good Deliverybar looks deceptively simple. The metal ismelted, usually in an induction furnace (whichmay be capable of melting enough metal to cast10 or 20 bars) and is then poured into an openmould made of cast iron or graphite. TheLBMA banned the use of gated moulds(otherwise known as closed moulds) in 2008.Gated mould systems involve casting verticallyinto a cast iron mould with multiple chambers,usually three, which are closed by a gate, withthe metal being fed through a gating system atthe top. These were formerly used byrefineries, particularly in China, and they hadthe advantage that the bar had a perfectly flattop surface. The problem with this castingsystem was that it was possible for the metal tosolidify in the gate before the mould chamberswere completely filled. This could result in

“A perfection

of means, and confusion

of aims, seems to be our

main problem.”

Albert Einstein

T H E L O N D O N B U L L I O N M A R K E T A S S O C I A T I O N

page 16

very large internal voids that were not alwayseasily detected after the bar was removed fromthe mould and the casting sprue cut off.

With open mould casting, good physicalquality depends on optimising the variouscasting parameters: preheating of moulds tothe right temperature; the temperature of themolten metal; the most appropriate moulddressing; and the pouring speed. The moulddressing, which helps protect the mould fromthe stream of molten metal and whichfacilitates the removal of the solidified bar, canbe of various types ranging from proprietarysuspensions of refractory chemicals to carbonblack, which is applied to the mould using asmoky acetylene flame. Mould dressings whichcan result in residual moisture in the mouldmay give rise to reactions with the moltenmetal, leading to the production of significantamounts of internal porosity. Pouring speed isanother important determinant of bar quality.If the pouring speed is too low and particularlyif the moulds are insufficiently heated, layeringis likely to result. If layering is pronounced, tothe extent that there are deep horizontalstriations which can entrap dust or dirtbetween them, this will be grounds forrejecting a bar. There is often a small degree oflayering in some bars, which will be acceptable.

In contrast to water, which expands when itfreezes, gold and silver both contract by around12%. This has important implications for barcasting. Given that the mould temperature iswell below that of molten metal, the first partof a bar to solidify will be on the bottom andsides of the mould. As the metal then shrinkson solidification, the result is a depression onthe top surface – sometimes with pronouncedshrinkage rings, which are formed as thesolidification front advances. Preheating themoulds effectively and applying a flame to themolten surface of the metal immediately aftercasting can moderate the amount of shrinkageand results in only a small depression on thetop surface. At the other extreme, however, ifthere is insufficient metal left in the final stagesof solidification, a shrinkage cavity (sometimesdescribed as a crack) can form down themiddle of the top surface of the bar. Cavitieslike this will always result in a bar beingrejected because they can contain debris oreven water (the latter having potentiallydisastrous consequences when such bars areremelted).

Moulds do not last forever. Cast iron is avery brittle material and the thermal shockexperienced on the bottom of the mould wherethe stream of molten metal hits the mould

surface will eventually result in the formationof a crater with the mirror image of a nodulebeing formed on the bottom surface of the bar.Initially, such protrusions are hardly noticeablebut as the crater increases in size and depth,eventually there comes a point when the nodulewill be so large that the bars will not stacksafely. The shrinkage depression on the top of abar actually allows for a minor nodule to beaccommodated within it without affecting thestackability of the bar.

Some Typical Defects andImperfectionsOne of the most common bar imperfections isknown as a ‘button’. This is often found on thebottom surface of a bar and it is thought toresult from the presence of a film of airbetween the molten metal and the mould,which then collapses into a circle beforeescaping as a bubble and leaving behind adiscernible, approximately circular area (seeFigure 1) which is however clearly innocuousand requires no further investigation duringinspection. However, in some cases, theformation becomes more plug-like inappearance (see Figure 2) and even though theexplanation is almost certainly the same, vaultmanagers will not take the chance in case this

Figure 1 - “Button”

Figure 2 - Plug-like “button” Figure 3 - Shrinkage affecting bar marks

A L C H E M I S T I S S U E S I X T Y T W O

page 17

really is a plug with some foreign body insertedin the metal underneath it. They will thereforeinvestigate such plug-like features by means ofan ultrasonic probe. Although effective, this is atime-consuming process and vault managersmay exercise their discretion to reject wholebatches of bars if they are found to contain asubstantial number of plug-like defects.

The shrinkage depression is in itself anormal feature of a gold or silver bar cast in anopen mould. However, if it is verypronounced, it can cause interference with themarks on the surface (this is particularly thecase if the bar number or assay mark ispositioned in the centre of the bar) and thismay be grounds for rejection. The same thingapplies if the shrinkage rings are verypronounced (see Figure 3) to the extent that ittends to make the bar marks difficult to read.On the other hand, vault managers will acceptbars where the company stamp is partly missingas long as there is no doubt about the identityof the bar’s manufacturer.

Holes of various types can be found on bars.They may result from some kind of interaction– for instance on the bottom surface due to themould dressing, which often can be seen in theform of a honeycomb effect. On the topsurface of silver bars, quite large holes may befound due to the fact that gases such as oxygenand nitrogen can dissolve in molten silver and

are evolved during the final stages ofsolidification. Small shallow holes where thereis no danger that something more profound isdisguised will be acceptable, but the smallestpin hole may in fact lead to a larger internalcavity, and these will always be investigated andmay therefore be grounds for rejecting a bar.

Health and safety considerations havebecome increasingly important in recent yearsand one important feature of bars that maycause a problem here is sharp edges, which maybe produced for instance by grinding the topsurface to improve its appearance or evensometimes by hammering. If a bar cannot behandled safely, it will be rejected. Hammeringis a practice which was formerly used toremove or disguise surface defects. Whilereducing small asperities with a hammer maybe acceptable, if its use is widespread on thesurface of a bar, it is more than likely that thiswill be grounds for rejection.

The marks on a Good Delivery bar areobviously a vital requirement for an efficientvaulting operation. There are many ways inwhich marks can be inadequate to the extentthat a bar will be rejected. The marks may be:l missing (for instance an assay mark on agold bar that only shows three digits would notbe acceptable, as would a bar with a missingnumber or year stamp)l shallow (which means that the mark is

insufficiently durable to withstand anymovement and restacking). For this reason,laser marking is not permitted and dot matrixpneumatic punching of the marks on the topsurface will only be allowed if the resultingmarks are at least as durable as those producedby conventional punching. On the other hand,dot matrix punching on the end surface of abar, which is not subject to wear and abrasionin the vault, is more easily accomplished).

Tampering with any of the main marks (barnumber, assay or year) will result in a bar beingrejected. This includes overstamping to correcta previously applied incorrect number.

One imperfection which is tolerated iswhere a double image of a company logo hasbeen produced by double stamping with thetwo stamps being slightly offset (as long asthere is no doubt about the identity of the bar).

Future WorkAt the 2009 conference, the LBMA circulated aVisual Guide to the Acceptability of GoodDelivery Bars. Much of this focused on old USgold bars. Work on a second edition, whichincludes a wider coverage of different defects,including more silver defects, is underway. Anycomments or questions on the above issuesfrom refiners would be welcomed. n

c

(£25)

T H E L O N D O N B U L L I O N M A R K E T A S S O C I A T I O N

page 18

The capital-adequacy requirements set out inthe third Basel banking supervision accords,endorsed by G20 leaders in November lastyear, are a crucial means of preventing a repeatof the liquidity crisis that occurred in 2008.

There is, though, room for improvement inthe design of the proposed rules. The ruleswould require banks to hold buffers of high-quality liquid assets, designed to cushion themfrom acute short-term funding strains. Whilethe proposals are clearly a significant stepforward in ensuring such strains are avoided,the definition of liquid assets is too limited: asthey stand, the proposals only permit banks tohold cash, high-quality government bonds andhigh-quality non-financial corporate andcovered bonds (the latter two with a ‘haircut’ –a discount – to reflect their higher credit risk).

In a world of hugely elevated sovereign-debtrisk, there is a real danger that under theexisting proposals banks would become overlydependent on government bonds for liquidity.In the last crisis, sovereign bonds were far fromimmune to liquidity issues, and given thecurrent record levels of Western government

debt and ongoing concerns over sovereign-debtdowngrades (or even defaults), a repeat of thisscenario would pose a real risk to the liquidityprovisions.

This issue could be remedied with addedasset diversification. The more assets eligiblefor inclusion in the liquidity buffers, the lessdistortion the new regulations will cause in anyone market and the lower the concentrationrisk for commercial banks.

The ultimate high-quality liquid asset isgenerally considered to be gold. That isbecause gold bears no credit risk: it involves nocounterparty and is no one’s liability. The risksassociated with it are not correlated – notrelated – to the risks of other financial assets,making it an effective diversifier, acharacteristic underpinned by its uniquelydiverse demand base. At the height of the2007-09 liquidity crisis, it was used extensivelyby fund managers to raise the cash necessary tomeet margin calls – to add cash to theiraccount with their broker – and to payredemptions in order to stay in business. Todate, however, gold has not been included

under Basel III’s liquidity proposals.The Institute of International Finance

summarised the curious nature of gold’somission when, last April, it submittedcomments on Basel III: “It is striking that gold isnot recognised as having liquidity value,whereas gold is virtually always liquefiable forcash and tends to benefit from a perceived ‘safehaven’ status”.

The bottom line is that more debate isneeded, as the current standards are short-sighted. In Europe, the European Commission,under the leadership of Michel Barnier,commissioner for the internal market, hasbegun work on the fourth capital-requirementdirective (CRD IV), which will transpose BaselIII into draft law. That will be reviewed by theEuropean Parliament rapporteur Othmar Karasand the members of the European Parliament’seconomic and monetary affairs committee.There is still time to amend the regulation toreflect a reality recognised by governmenttreasuries and individual households forcenturies – that in bad times, as in good times,there is a market for gold. n

Regulation UpdateAdding Gold to Europe’s Liquidity BuffersBy Natalie Dempster, Director of Government Affairs, World Gold Council

The local forum for the global industry : Shanghai

The LBMA Bullion Market Forum 2011

26 MayThe Pudong Shangri-La HotelShanghai, Chinawww.lbma.org.uk

The LBMA Bullion Market Forum 2011focuses on issues in the bullion market inChina, of interest to market participantsboth in China and in countries thattrade with China.

This is the first time the LBMA hasreturned to China since the successful2004 LBMA Precious Metals Conferencein Shanghai. Given China’s growingkey role in global bullion markets,Shanghai will provide the ideal settingfor the LBMA Forum. ManagingDirectors and other representatives ofthe London and Chinese bullion marketswill be in attendance. Join the Forum tomeet bullion market contacts both newand old.

T H E L O N D O N B U L L I O N M A R K E T A S S O C I A T I O N

page 20

LBMA News

MEMBERSHIPMembersFortis Bank SA/NV and RBSSempra resigned as Memberseffective 31 December, 2010 astheir desks were taken over byBNP Paribas and JP Morgan,respectively.

ABN AMRO N.V. also resignedeffective 31 December, 2010 asthey closed their bullion desk.

AssociatesOn 21 March, Aster CommoditiesDMCC was admitted as anAssociate.

On 28 March, World GoldTrust Services was admitted as anAssociate.

Most recently on 6 April,Kuveyt Türk Katilim Bankasi A.Ş.was admitted as on Associate.

SGS Group resigned theirAssociate status as they would beunable to provide renewedsponsorship for their upcomingAssociate review. The LBMArequires Associates to renew theirsponsorship every three years,either through the originalsponsoring companies or, if theAssociate is no longer doingbusiness with them, with newsponsors. Korea Zinc resignedtheir Associate status effective 31December.

These changes brought themembership list at 6 April to atotal of 123 companies, comprisedof 59 Associates, 4 Affiliates and 60Members.

GOOD DELIVERY LISTThe silver refinery of the RoyalCanadian Mint, was added to theSilver List on 14 April, 2011. Thecompany’s gold refinery was listedin approximately 1919.

COMMITTEESManagementThe Management Committee mettwice in the first quarter of 2011.As usual, the Committee’s worklargely consists of reviewing thereports from the Sub Committeesand making decisions based ontheir recommendations.

Recognising the important roleplayed by Ordinary Members inthe work of the LBMA and in themarket more generally, theCommittee proposed to create anadditional place on theManagement Committee for arepresentative from an OrdinaryMember. This would create anine-person LBMA ManagementCommittee consisting of fiveMarket Makers, four OrdinaryMembers and the LBMA ChiefExecutive. The Committee also

proposed that terms forManagement Committee membersbe extended to two years insteadof one, to ensure continuity in themembership of the Committee.These proposals were discussedand approved by an ExtraordinaryGeneral Meeting of LBMAMembers held on 12 April. AllCommittee members will stepdown at the AGM in June 2011and the two year term for theMarket Maker representatives willbegin with effect from the electionat that meeting. The OrdinaryMembers elected at the 2011AGM will have a term of only oneyear. Thereafter, the two groupswill stand down after alternatingtwo-year periods.

The Committee approved thePAC’s recommendation to donateto the British Red Cross – JapanTsunami Appeal. The funds usedfor the donation derive from thefines which the Executive levies onMarket Makers which fail tocontribute to the daily GOFO andSIFO figures.

The Committee also approvedthe PAC’s recommendation toprovide a Bursary to FergalO’Connor, a PhD student atTrinity College, Dublin. Forfurther information, please see theannouncement on page 13.

Regulatory AffairsIn response to the growingnumber of regulatory issues facingthe bullion market, theManagement Committee has setup a new standing committee ofthe LBMA, the Regulatory AffairsCommittee. This Committee ischaired by Ed Wells of HSBC, withrepresentation from the Bank ofNova Scotia – ScotiaMocatta,Barclays Capital, Deutsche Bank,Goldman Sachs, JPMorgan,Metalor and UBS. TheManagement Committee will berepresented on the newCommittee by Simon Churchill.

Barbara Ridpath of theInternational Centre for FinancialRegulation also accepted aninvitation to join the Committee.

The Committee’s primary tasksare to discuss and disseminate tothe membership information onregulatory issues facing the bullionmarket as well as to recommend aresponse from the Associationwhere appropriate. TheCommittee has met twice in thefirst quarter of 2011. The firstmeeting focused on responding tothe US Securities & ExchangeCommission (SEC) consultationpaper on conflict gold regulation.

The Committee also discussedpossible EU & US regulation ofOTC derivatives. For more onregulation issues facing theprecious metals market see theregulation update on page 18.

PhysicalThe Committee met three timesin the first quarter of this year. Inspite of the substantial number ofcompanies achieving GDaccreditation last year, there arestill many gold and silver refinerswhich are hoping to achieve GDstatus. The Committee has spentsome time discussing vaultprocedures as well treatment ofbutton defects or “imperfections”.This topic, among other, will bediscussed at a meeting of vaultmanagers in mid-May. For moreon the assessment of barimperfections in London, pleasesee the article on page 15. Thistopic was also discussed at the2011 Assaying & Refining Seminar(page 2). Another important topicrelates to the levels of impuritiesin GD bars that are considered tobe deleterious. The Committeehas asked the Referees group tolook into the question of whetherthese levels can be quantified forthe guidance of GD refiners.

By Stewart Murray, Chief Executive, LBMA

Charitable Giving 2011As noted above, the LBMA Management Committee approved adonation to the Red Cross - Japan Tsunami Appeal.

Japan’s important role in the international bullion market, fromtechnical expertise to retail, is widely known. 10 gold and 13silver Good Delivery listings are evidence of this. ManyMembers will remember the 2008 LBMA Conference in Kyoto.Our thoughts remain with our many friends living and workingin Japan as they rebuild. In his editorial over the page, Bob Takaidescribes the atmosphere in Tokyo after the tsunami and theeffects on the market.

Suggestions of charitable funds are welcome from all members ofthe market.

A L C H E M I S T I S S U E S I X T Y T W O

page 21

Public AffairsThe PAC has met four times in thefirst quarter of 2011. The primaryfocus of the first two meetings wason speaker selection for the LBMABullion Market Forum: Shanghaion 26 May. This Forum focuses onissues in the bullion market inChina of interest to marketparticipants both in China and incountries that trade with China.For more information, please seethe announcement on page 18.

Most recently, the Committeehas worked on the speakerprogramme for the LBMA’s annualprecious metals Conference, whichis to be held this year in Montreal,Canada during the period 18-20September. The LBMA isdelighted to be working with theLPPM again in the arrangementfor this premier industry event.The LBMA will also be workingwith the LPPM during the LondonPrecious Metals session at theIPMI Conference in June.

MembershipThe Committee met once duringthe past quarter when it discusseda new sponsorship regime forMember and Associateapplications. The new systemfollows the Associate Reviewsystem by putting the onus on theapplicant to ensure that letters ofsupport are provided in good timeby its sponsors. The Committee’smain activity is of course vettingapplications for membership andmaking recommendations to theManagement Committee. As isimplied by the list of newAssociates above, this work iscarried out mainly by email.

FinanceThe Committee met in January toreview the three-year forecast forincome and expenditure. It alsomet in March to discuss the resultsof the annual audited accounts for2010, which showed a substantialsurplus mainly due to the successof the 2010 Conference in Berlin.

Data CommercialisationThe LBMA’s eight ForwardMarket Makers have committed tocreating a Silver Forward Curve.The Market Makers willcontribute their forward prices forsilver at the close of business eachday, consisting of 10 data pointscovering the period from oneweek to three years forward. TheMarket Makers have alsocommitted to the creation of aGold IRS Curve. The MarketMakers will contribute their goldIRS prices at the close of business

each day, consisting of 10 datapoints covering the period fromone to 10 years forward. The datawill submitted to the LME systemas with the existing gold forwardcurve. The LME system willremove the high and lowcontributions for each of the 10tenors and calculate the mean ofthe rest, which are the figures thatwill be published on Bloomberg,Thomson Reuters and others.Both the Silver Forward Curve andthe Gold IRS Curve will beavailable in May 2011. n

LBMA Annual General Meeting - 5.30pm on22nd JuneArmourers’ Hall, London

The twenty-third AGM will take place at Armourers’ Hall, ColemanStreet in the City of London at 5:30 pm on 22nd June. All Membersand Associates are cordially invited to attend. This will be an idealopportunity to find out about the activities of the LBMA in the pastyear as well as to meet other Members during the drinks receptionfollowing the meeting.

The formal papers for the meeting (including nomination forms forthe Management Committee) will be circulated in May to the LBMAcontact at each Member and Associate company. All members of theCommittee stand down at this AGM but may be re-elected.

MAY26LBMA Bullion Market Forum

Shanghai

T: +44 (0)20 1196 3067

F: +44 (0)20 1196 2112

varsha.peiris@lbma.org.uk

www.lbma.org.uk

JUNE11-14IPMI 35th Annual Conference

San Antonio

T: +1 850 476-1156

mail@ipmi.org

www.ipmi.org

22LBMA AGM

Armourers’ Hall, London

T: +44 (0)20 1196 3067

F: +44 (0)20 1196 2112

varsha.peiris@lbma.org.uk

www.lbma.org.uk

SEPTEMBER18-20LBMA Precious Metals Conference

2011

In association with the LPPM

Montreal

T: +44 (0)20 1196 3067

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varsha.peiris@lbma.org.uk

www.lbma.org.uk

DIARY OF EVENTS

T H E L O N D O N B U L L I O N M A R K E T A S S O C I A T I O N

page 22

…I was at Sumitomo Metal Mining’s office inShinbashi, Tokyo to say greetings and to announce mychange of assignment from 1st April. I was with James(Iwanaga) who was just about to ring upstairs from theground floor lobby to say that we had arrived atreception.

Suddenly the earth shook rather strongly, in a waythat I hadn’t experienced before. I shouted to James,“James, an earthquake. Big one.” He shouted back tome, “Bob, the phone is dead. This must be a very bigone. We’ve got to run.”

We dashed out of the building into the street. The tremor gotbigger and bigger. I could see people getting out from the nearbybuildings, all with scared faces, and all saying to each other that thisearthquake is clearly different from the usual ones.

In the Shinbashi business district, there are many “pencil buildings”,less than 10 stories high, built side-by-side on very small patches ofland. Those buildings were shaking like trees being blown by a strongwind. The earth beneath my feet trembled even more strongly – Icould hardly stand without holding onto the trees on the street. I feltlike I was in a film in which Godzilla was walking down the streetmaking the ground shake with each step.

After the initial tremor, which lasted for about a minute or two, wefinished our scheduled meeting swiftly and started to walk towards theJR Shinbashi Station. We soon realised that our cell phones were dead.Almost everyone on the street was holding their phone in their hands,mumbling that it didn’t work.

We came to a square where there is a big TV screen attached to theside of a building. On that sunny Friday afternoon around 4 pm, wesaw horrifying scenes unfolding live on the screen. A flood of waterwas sucking in roads, bridges, cars, houses and people. I couldn’tbelieve my eyes, thinking this must be a nightmare or some Hollywooddisaster movie.

We decided to try to find somewhere where we could get moreinformation about what was really going on, so James and I walked tothe Shinbashi Daiichi Hotel, where we found the lobby full of peoplegathering information. Finally we found out that a mega earthquakehad hit the northeast region of Japan, and a giant tsunami hadswallowed the cities on the coastline. James luckily spotted a desk-topPC available for hotel guests and we finally connected to our office viaemail.

We found that our colleagues were stuck in the office on the 34thfloor and the lifts were not working. We also discovered that allmetropolitan transportation – trains, underground and buses – hadstopped operating, and the streets were full of cars and taxies trying toescape from the city. Our employer soon announced that all employeesshould leave the office before it got too dark and cold to walk. Many ofour colleagues walked down the stairs to the ground floor beforemarching much further back home to wherever they live.

James and I also had no other choice but to walk home. It wasalready around 6 o’clock on a Friday evening, the most pleasant time ofthe week under normal circumstances. The streets were full of peoplelike us. They all looked so exhausted that they didn’t even have theenergy left to mourn their most unpleasant fate. We walked for about4 hours, reaching home at around 10 pm, but we were the lucky onesbecause others who lived too far away to walk home had to spend anight in the office.

About a month and a half has passed since that tragicday. We now know that some 28,000 people are dead ormissing and 4,900 people injured – mostly in the northeastregion of Japan, which was hit by this magnitude 9.0 megaearthquake and the subsequent tsunami. To make mattersworse, we have another crisis at the Fukushima Daiichiatomic power plant, where the vital fuel cooling systemhas been badly damaged by the tsunami and has leakeddangerous radioactive substances into the air and ocean.The beautiful coastline of the Fukushima Prefecture, about

240 km north from Tokyo, is facing the danger of being contaminatedby nuclear substances.

Tokyo Electric Power, the owner/operator of the power plant, isnow trying to contain the nuclear spill-over with the help of theJapanese government, but the severity of the incident has been raised toLevel 7, which is the highest possible and as bad as the Chernobylnuclear explosion of 1986. The battle with the radiation leakage is stillgoing on and I do hope the whole mess will be sorted out as quickly aspossible.

From the day the earthquake hit, there were outflows of money andpeople from Tokyo. A number of foreign companies, banks andembassies shifted their staff to cities in the western part of Japan likeNagoya, Osaka and Fukuoka or even transferred them to Hong Kongand Singapore.

Money also flooded out from Japanese Exchanges, including fromcommodities. TOCOM Platinum was hit by heavy selling from abroad.The price plunged from $1,790 to $1,660 within a week, and theforward premium also collapsed from $22/oz to only $2/oz. TheOpen Interest of TOCOM PT fell by as much as 37% from 62,000contracts to 39,000 in just over a month. TOCOM Gold was also soldby foreigners and the Open Interest dropped by 19% from 120,000 to97,000 by the end of March. The gold forward premium also plungedfrom $6/oz to $2/oz.

On the physical side, many base metals refineries were hit by theearthquake and tsunami. The domestic supply of silver, zinc and leadhas been affected. The manufacturing plants of some Japanese carmakers have also been damaged and some PGM supply contracts weresaid to have been cancelled during March.

Though we still have lots of things to do in reconstructing thedamaged area, we believe this crisis could be an opportunity to changeour society for the better. As the old Chinese proverb says: “Misfortunecan be turned into a blessing”.

Last but not least, I must tell you that in April I leave the bullionmarket after 31 years of involvement. My new assignment inSumitomo is to head the Energy Division, where I will run theupstream oil and gas exploration business as well as themid/downstream trading business. The assignment is quite challengingfor me in the face of the ongoing nuclear disaster and the anticipatedchange in the structure of the Japanese energy market.

I would like to take this opportunity to thank all of you in thebullion market. It has been a pleasure as well as an honour for me tobe part of the market for so long.

Arigato to all of you and Sayonara LBMA ! n

EditorialEditorial Comment by Bob Takai, General Manager, Energy Division, Sumitomo Corporation

At 2:46 pm on 11th March…

A L C H E M I S T I S S U E S I X T Y T W O

page 23

Silver’s industrial demand has greatly expanded its

role in the global silver market in recent years. A

number of factors have played a crucial factor in this

growth, not least of which is silver’s unique technical

proficiency, which makes it suitable for a wide range

of applications while also limiting the ability of

industrial users to shift in favour of less-costly

alternatives.

Silver is one of the best electrical and thermal conductors, which makesit ideal for a variety of electrical end uses, including switches, multi-layerceramic capacitors, conductive adhesives, contacts and in silvered film inelectrically heated automobile windshields. Silver is also used as a coatingmaterial for optical data-storage media, including DVDs. Silver isemployed as a catalyst and used in brazing and soldering as well. It is alsoincorporated into health and medicinal applications given its naturalantibacterial qualities.

You’ll find silver in many of the electronic devices we use today,including cell phones, plasma-display panel televisions, personalcomputers and laptops. Silver is also incorporated into button batteries,water-purification systems, automobiles, and it is a component of thegrowing photo-voltaic industry, to name just a few of its applications.

Putting silver industrial demand growth into perspective (Figure 1),in 1990 it stood at 273 million troy ounces (Moz), representing a thenrespectable 39 percent of total fabrication demand. By 2000, the worldtotal had grown by 100 Moz and saw its share exceed 40 percent forthe first time. After the technology bubble burst in 2001, with silverindustrial demand suffering a setback as a result, industrial offtake grewuninterrupted for the following six years. Although silver industrial

demand declined after the global economic crises that began in 2008,by 2010 industrial demand had already recouped most of the lostoutput.

In fact, a healthy outlook for global silver industrial demand isforecast for the next five years according to a recent report. Thereport, The Future of Silver Industrial Demand, was produced by theprecious metals consultancy, GFMS Ltd., on behalf of the SilverInstitute, and it examines silver’s industrial uses in detail through 2015.

The report states that industrial uses of silver should rise sharply to666 Moz in 2015, representing 60 percent of total fabrication demandthat year – a 36 percent increase over 2010’s figure of 487 Moz. Thereport maintains that stronger silver industrial demand in the US andAsia will be a key factor in driving growth in the global total through2015, and healthy developing country demand especially in marketssuch as China and India will also be an important factor. Much of theforecast growth will come from established applications, such as silver’suse in electrical contacts and in the photo-voltaic market.

The report also focuses on many new uses that rely on silver’santibacterial qualities, where the incorporation of silver makes thedifference between an ordinary product and a unique one. Noteworthyin the report is the potential market impact of 11 recent applicationsthat incorporate silver. These uses, which range from food packaging toradio-frequency identification tags to autocatalysts, taken togethercould exceed 40 Moz of industrial demand by 2015. Emerging enduses that benefit from silver’s antibacterial properties or incorporatesilver’s electrical and thermal conductivity are expected to boost silverconsumption through 2015.

The report demonstrates how buoyant silver industrial demand is,not only because of the lack of substitution, but also because of thewide range of established and growing new uses that make up industrialdemand. nThe Silver Institute is a non-profit internationalindustry association headquartered in Washington,D.C. Established in 1971, the Institute serves as theindustry’s voice in increasing public understandingof the value and many uses of silver.

Silver Industrial Demand OutlookLooks BrightBy Michael DiRienzo, Executive Director, The Silver Institute

Given the freedom of expression offered to contributorsand whilst great care has been taken

to ensure that the information contained in theAlchemist is accurate, the LBMA can accept no

responsibility for any mistakes, errors or omissions orfor any action taken in reliance thereon.

The Alchemist is published

quarterly by the LBMA.

For further information please

contact Alice Toulmin,

13-14 Basinghall Street

London EC2V 5BQ

Telephone: 020 7796 3067

Fax: 020 7796 2112

Email: alchemist@lbma.org.uk

www.lbma.org.uk

The

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Figure 1 - Industrial Demand’s Growing Importance

2000

2009

2015 F

Coins and Medals

Silverware

Jewellery

Photographic

Industrial

0 10 20 30 40 50 60 70% of Total Fabrication