Not content with holding the biggest paper short position in silver, JP Morgan is now intent on cornering the copper market, as the monopolist firm stretches its FRBNY-facilitated muscles in an attempt to stem the massive losses incurred via its silver short. As the Telegraph reports, following up on a story of a "rogue" purchaser who bought up $1.5 billion in copper on the LME, "the American investment bank JP Morgan is the mystery trader that grabbed more than half the copper on the London Metal Exchange." This is a huge copper purchase, and represents between 50% and 80% of the 350,000 tonnes in reserves, confirming that JPM is now the dominant manipulator in yet another commodity market. The purchase also pushed the price for immediate delivery to $8,700, the highest since October 2008. It is unclear how China, which is the biggest non-speculative end user, will react to this development, nor whether the CFTC will (ever) take any action against such blatant market manipulation. One thing is certain: the LME will do absolutely nothing: "Diarmuid O'Hegarty, head of compliance, said: "The LME has noted recent comments about the current circumstances in the copper market. Such circumstances are not unusual and the exchange is exercising its well established procedures for maintaining an orderly market." He added that large trades were not a cause for concern because the market's rules dictate that holders have to lend out a proportion of their stock to ensure a smooth supply of the metal." And who would possibly assume that JPM may not follow the rules...
As to the reason why JPM is manipulating this latest market: simple -ETF frontrunning:
Traders said JP Morgan's name had been circulating the market all day as the most likely buyer, especially since it is about to launch a physically-backed "exchange-traded fund" (ETF) in copper imminently.
One metals broker dealing on the LME said: "The story is that they're positioning themselves in front of the ETF. There's been a lot of speculation it's them."
Traders noted that there was no physical shortage of copper in the markets but that fears of a squeeze have persisted ever since a raft of investment banks announced their intention to launch ETFs this autumn.
Last month metal traders wrote to the Financial Services Authority (FSA) claiming that licensing the funds, which are also likely to be launched by BlackRock, Goldman Sachs and Deutsche Bank, may amount to "approving the next financial bubble".
It is estimated that if the copper funds are fully subscribed they would be looking to buy more than half the total stocks in LME warehouses.
Traders' concerns are based on the ETF model that will require the investments to be backed by physical metals, such as copper, lead, aluminium and nickel, rather than paper assets offered by futures contracts.
Daniel Major, a metals analyst at RBS, said: "There isn't a huge buffer available for the market. The supply situation can quite easily tighten in copper."
It's all good, though: the LME is on top of it: "The LME moved to quash claims that a rogue speculator was attempting to corner the copper market." See, it's not rogue. It's just JPM. Ergo all is good.
As for the CFTC, we now know why they are so intent on delaying the size limit discussion: after all, any regulation will be forward looking - better let JPM accumulate all commodities it can and distribute these via hidden channels to affiliated subs before the ever so busy Gary Gensler corrupt cronies decide to raise their finger on what is increasingly an ever more blatant market manipulation scheme. At least in this case, JPM will push the price higher unlike what it is doing courtesy of its gold and silver manipulation. However, the PM market (especially Asian accounts) will soon make sure Blythe Masters is looking for a job within 3 months as we predicted a few weeks ago.