You are here
Gold seems to have won the Blanchard case
By Heather Thomas
The New York Times
Saturday, November 19, 2005
http://www.nytimes.com/2005/11/19/business/worldbusiness/19copper.htm
l
LONDON, Nov. 18 -- This much is true in the copper market: Prices
are at record highs, and there is a Chinese trader named Liu Qibing.
Swirling around those two certainties are rumors and innuendo that
have buffeted a market already prone to fluctuating on whispers, let
alone fact. Did Mr. Liu, a trader for China's State Reserve Bureau,
make wrong-footed bets that copper prices would fall?
Some traders and brokers believe that, and they estimate that
covering Mr. Liu's "short" positions - in which a trader borrows a
commodity and then sells it with the hope of buying it at a lower
price and then returning it - could cost the bureau hundreds of
millions of dollars.
Or did China execute a commodities-trading head fake, driving up the
price so it could sell stockpiles of copper at a greater profit, as
some other traders believe?
And is Mr. Liu missing, as several reports have said, or is he about
to be promoted?
The wide disparities in the reports about Mr. Liu, which surfaced at
the beginning of the week, highlight how little factual information
is available for the market. But that has not stopped people from
buying copper.
In London, contracts for delivery in three months rose $55, or 1.3
percent, to $4,200 a metric ton after reaching a record $4,243. In
New York, copper for December delivery rose 3.2 cents, or 1.6
percent, to $1.978 a pound, the seventh consecutive record.
The normally tight-lipped officials responsible for overseeing
China's commodity trading appeared to try to clear things up this
week and started to make public statements about the country's
copper stockpiles and Mr. Liu. But some traders and other market
participants say this is further confusing the issue, because they
suspect that the Chinese are supplying false information in a
deliberate attempt to move prices.
China Daily, the government-controlled newspaper, identified Mr. Liu
on Thursday as the import division chief of the National Control
Center for the Reserve Bureau, which manages China's commodities
reserves, and said he had built a "massive short position" in copper.
Mr. Liu sold short 110,000 to 220,000 tons of copper, which need to
be delivered to London Metal Exchange warehouses by Dec. 21, the
paper said. By comparison, the current inventory of the exchange's
warehouses is about 140,000 tons. Mr. Liu acted alone, the paper
said, and the government is not responsible for his actions.
Maqsood Ahmed, an analyst at Calyon Global Trading in London, is one
of several market participants who do not accept the report as the
full truth. Like many in London, he has heard that Mr. Liu will
return to his job next week at a higher level. Mr. Ahmed thinks that
Mr. Liu may have executed the "greatest bluff of all time" by
driving prices up.
"The whole thing about a short position is a smoke screen" to keep
prices high so the Chinese can unload their large stockpiles of
copper at peak prices, Mr. Ahmed says. The State Reserve Bureau
declined to comment on Mr. Liu's whereabouts, the short position or
the amount of copper it may have stockpiled.
Mr. Ahmed, who has been an outspoken skeptic about copper's high
prices in recent months, was quick to add that his theory could be
wrong. In fact, the only thing most market participants in London
say they are sure of is that they do not know precisely where China
stands in the market.
"Most of us don't know the full details or the size of any Chinese
positions or if the positions exist at all," said Jeremy Goldwyn,
head of industrial commodities at Sucden, a London commodities
broker that has no business relationship with the State Reserve
Bureau. "The only people who know for sure are the brokers
involved."
The brokers who executed Mr. Liu's trades and who may be stuck with
his losses if the Chinese government refuses to pay or deliver
copper to cover them, if they exist, have been silent. Several
participants in the market say the Standard Bank of South Africa and
Sempra Energy, based in San Diego, hold at least some of the
contracts. Spokeswomen from Standard and Sempra declined to comment
on the issue.
Obtaining reliable information in the market, particularly about
closely guarded end users like the Chinese, is impossible,
participants say. "You can only speculate on what's been published
and whether it's true or not," added one London metals broker, who
spoke on the condition of anonymity because he is not authorized to
comment to the news media.
Other copper end-users, the manufacturers who actually need the
physical product and are generally active in the futures market, are
terrified to trade at all, the broker said, because they have no
idea whether the market will plummet or continue its ascent.
In a sign of the market's hair-trigger jumpiness, prices dropped $90
in five minutes on Wednesday, traders said, after Reuters, citing a
bureau official, said the bureau was moving to export 200,000 tons
of copper. After the decline, some traders quickly decided the
Chinese government was spreading that information to drive prices
down, perhaps to cover Mr. Liu's short position, and drove it up
instead by the close of the market. "If you were going to export
that much, why would you let the market know?" the broker said.
Whatever happens to Mr. Liu, analysts expect the market to be bumpy
toward the end of the year.
Copper and other commodities, once niche investments, have become
more mainstream in recent years, attracting money from pension and
mutual funds. If China is vulnerable to losses, it may provide a
painful reminder that commodities were niche investments for a
reason - they can be much more risky and volatile than stocks.
"There is a potential for larger declines in commodity markets than
on a normal stock exchange," said Neil Buxton, an analyst with GFMS
Metals Consulting in London. Generally, stock prices are based on
valuations of earnings and future earnings, Mr. Buxton said, while
copper and other commodities are just valued on "what people are
willing to pay at any particular time."
There is one group that says it is not frustrated by the market: the
regulators. "We see everything and have a complete picture of all
clients and all positions," said Adam Robinson, a spokesman for the
London Metals Exchange, who declined to comment on China's
position. "We believe the market is staying orderly and is trading
in an appropriate manner."
----------------------------------------------------
To subscribe to GATA's dispatches, send an e-mail to:
gata-subscribe@yahoogroups.com
To unsubscribe, send an e-mail to:
gata-unsubscribe@yahoogroups.com
----------------------------------------------------
RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS
Free sites:
http://www.cbs.marketwatch.com
http://www.usagold.com/amk/usagoldmarketupdate.html
http://www.capitalupdates.com/
http://www.silver-investor.com
http://www.thebulliondesk.com/
http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kereport.com
(Korelin Business Report -- audio)
http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)
http://www.resourceinvestor.com
http://www.goldpennystocks.com/
Subscription sites:
http://www.lemetropolecafe.com/
http://www.interventionalanalysis.com
http://www.investmentindicators.com/
Eagle Ranch discussion site:
http://os2eagle.net/checksum.htm
Ted Butler silver commentary archive:
http://www.investmentrarities.com/
----------------------------------------------------
COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS
Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112
888-413-4653
http://www.blanchardonline.com
Centennial Precious Metals
Box 460009
Denver, Colorado 80246-0009
1-800-869-5115
http://www.USAGOLD.com
Michael Kosares, Proprietor
cpm@usagold.com
Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
http://www.ColoradoGold.com
Don Stott, Proprietor
1-888-786-8822
Gold@gwe.net
El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
http://www.eldoradogold.net
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203
harvey@eldoradogold.net
Gold & Silver Investments Ltd.
Mespil House
37 Adelaide Rd
Dublin 2
Ireland
+353 1 2315260/6
Fax: +353 1 2315202
http://www.goldinvestments.org
info@gold.ie
Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
http://www.gloomdoom.com
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
gwestgaard@investmentrarities.com
Kitco
178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
http://www.kitco.com
Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
http://www.certifiedcoins.com
Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com
Lone Star Silver Exchange
1702 S. Highway 121
Suite 607-111
Lewisville, Texas 75067
214-632-8869
http://www.discountsilverclub.com
Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
http://www.milesfranklin.com
Contacts: David Schectman,
Andy Schectman, and Bob Sichel
Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
info@mocoin.com
314-965-9797
1-800-280-9797
http://www.mocoin.com
Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com
http://www.buysilvernow.com
Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
http://www.swissamerica.com
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com
The Moneychanger
Box 178
Westpoint, Tennessee 38486
http://www.the-moneychanger.com
Franklin Sanders
1-888-218-9226, 931-766-6066
----------------------------------------------------
HOW TO HELP GATA
If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.
By check:
Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
USA
By credit card (MasterCard, Visa, and
Discover) over the Internet:
http://www.gata.org/creditcard.html
By GoldMoney:
http://www.GoldMoney.com
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L
Donors of $1,000 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled GATA.
Donors of $200 or more will receive copies
of "The ABCs of Gold Investing" by Michael
Kosares, proprietor of Centennial Precious
Metals in Denver, Colorado, and "The Coming
Collapse of the Dollar" by James Turk and
John Rubino.
GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.
