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Ben Bernanke, we''ll be watching you
9:48p ET Wednesday, May 3, 2006
Dear Friend of GATA and Gold:
You have to love financial journalism like what
is appended here from the London Telegraph. To
raise the prospect of a crash in copper it
relies on an anonymous source whose personal
interest in the story cannot be evaluated and
so has to raise suspicion. Is the source
pursuing the public interest, or is he just
talking his book, trying to prompt the event
he is predicting? And what is the newspaper's
interest in picking out this particular
anonymous source? Is it the public interest,
or is the paper's editor or publisher short
copper himself now?
That copper has become the focus of much
speculation -- that it has been, in effect,
monetized -- probably won't be denied. But
couldn't that issue be addressed by experts
and market participants willing to be
identified?
The precious metals aren't the only things
that are manipulated in the markets. The
news media are too. But seldom is it as
blatant as it is here. The Telegraph has
been a better paper than this.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Copper Price 'Set to Plunge by 20%'
By Tom Stevenson
The Telegraph, London
Thursday, May 4, 2006
http://www.telegraph.co.uk/money/main.jhtml?
xml=/money/2006/05/04/cnlme04.xml&menuId=242&sSheet=/money/2006/05/04
/ixcitytop.html
The soaring price of copper could drop by a fifth in the next two to
three months, a senior trader on the floor of the London Metal
Exchange has warned. The dealer, who asked to remain anonymous, said
recent market fluctuations were typical of the trading pattern prior
to a significant change of direction.
"I expect a 20 percent correction. The market will be volatile and
illiquid for a while before it cracks," he said. The LME accounts
for around 90 percent of the world's trade in copper, dwarfing rival
markets in New York and Shanghai.
The price of copper has risen by 60 percent this year, with the cash
price for immediate delivery reaching a peak of $7,391 a tonne this
week, a five-fold increase on the $1,400 at which the metal traded
only four years ago. At yesterday's lunchtime fix of $7,231, copper
has generated huge profits for the speculative funds that have piled
into commodities but caused pain for industrial users.
The scepticism on the LME's trading floor is confirmed by the prices
being quoted by brokers for delivery on the longest contracts, which
are much lower than the current cash price. "Copper is the only
commodity in the world where you can buy for five-year delivery at a
45 percent discount," the trader said. "The market is saying the
current price is unsustainable or that supply will kick in to meet
demand."
An escalation in the volume of speculative trading and the growing
use of commodities as a diversification for pension funds away from
equities and bonds have contributed to the soaring price of the
metals traded on the LME. It is estimated that 80 percent of trades
derive from financial rather than industrial traders.
Big investors such as Hermes, which manages the retirement funds of
BT and the Post Office, Calpers, the largest public sector fund in
the US, and Sainsbury's pension fund have all announced plans to
increase their exposure to commodities.
The International Wrought Copper Council, which represents copper
fabricators, wrote to the LME and the Financial Services Authority,
saying: "This investment or speculative activity has come to
dominate the market, tending to divorce it from its industrial base."
For recent entrants to the market, a downward lurch like that
expected by traders would be a stomach-churning reminder that the
rise and rise of commodity prices in recent years is not one-way
traffic.
Investors are divided between those who believe metal prices are in
the early stages of a multi-year upward "super-cycle," driven by
demand from the developing economies of China and India, and those
who think recent rises are the last gasp of an unsustainable bubble.
Merrill Lynch recently compared the price performance of commodities
with listed futures, including copper, with those such as rubber and
steel that cannot be traded so easily using derivatives. On the
basis of this analysis it concluded the influence of speculators on
the market was "unprecedented" and analyst Richard Bernstein warned
that "commodity prices always fell in the 12-month period subsequent
to extreme commodity speculation."
Trading has soared over the past 18 months at the famously raucous
LME, where a twice-daily round of five-minute "rings" sets the
prices of six metals -- zinc, tin, lead, copper, aluminium, and
nickel. During a short but intense dealing session, traders from 11
member firms face each other off from positions on a circular red
leather-upholstered banquette.
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