Morgan said to cut silver short, denies 90% claim on copper


By Frank Tang
Tuesday, December 14, 2010

NEW YORK -- JPMorgan's commodity business was uncomfortably in the spotlight on both sides of the Atlantic on Tuesday amid reports it had amassed a large copper long position and was unwinding a big silver short.

While analysts and traders have said both positions could be tied to the bank's large customer trading business rather than any proprietary strategy, the reports have placed the bank in the public eye at a time when U.S. and European regulators are cracking down on commodity market concentration.

The bank, which joined Goldman Sachs and Morgan Stanley at the top tier among commodity traders with the acquisition of the RBS-Sempra operations earlier this year, is reducing a large position in U.S. silver futures, the Financial Times reported on Tuesday, citing a source familiar with the matter.

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In Europe, data from the London Metal Exchange showed that a single entity had increased its control over warehouse copper stocks and cash contracts to more than 90 percent, up from a 50-80 percent holding reported for the past several weeks.

A spokesman for JP Morgan, which had been reported as holding the 50-80 percent position, denied that it held over 90 percent of stock warrants, but declined comment on whether it had a dominant position of less than that.

A JPMorgan spokeswoman in New York declined immediate comment when contacted by Reuters.

The company's silver futures positions would be "materially smaller" in the future, the FT reported the source as saying.

In October, JPMorgan and HSBC Holdings Plc were hit with two lawsuits in late October by investors who accused them of conspiring to drive down silver prices, and reaping an estimated hundreds of millions of dollars in profit.

Open interest in U.S. silver futures has declined by nearly 20 percent since November, while prices have surged to 30-year peaks, trends that market analysts say suggest that short covering has helped fuel the gains. Prior to November, however, open interest had risen, suggesting bullish longs.

JP Morgan and HSBC were accused in the lawsuit of manipulating the market for Comex silver futures and options contracts from the first half of 2008 by amassing huge short positions in silver futures contracts that are designed to profit when prices fall. If they have been selling futures without an offsetting hedge since 2008, the banks would have missed out on the biggest silver rally since the Hunt Brothers attempted to corner the market 30 years ago.

Recently prices have surged three-fold, topping $30 an ounce last week, strongly outperforming gold in the past few months.

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Prophecy Drills 71.17 Metres of 0.52 percent NiEq
(0.310 percent Nickel 0.466 g/t PGMs +Au and 0.223 percent copper)
from surface at Wellgreen Project in the Yukon

Prophecy Resource Corp. (TSX-V: PCY) reports that it has received additional assays results from its 100-percent-owned Wellgreen PGM Ni-Cu property in the Yukon, Canada. Diamond drill holes WS10-179 to WS10-182 were drilled during the summer of 2010 by Northern Platinum (which merged with Prophecy on September 23, 2010). WS10-183 was drilled by Prophecy in October 2010. Highlights from the newly received assays include 71.17 metres from surface of 0.52 percent NiEq (0.310 percent nickel, 0.466 g/t PGMs + Au, and 0.233 percent copper) and ended in mineralization. For more drill highlights, please visit: