Confirmation today that JPM is selling its physical commodity business ending the bank’s five-year foray into owning and storing raw materials. See this December CBC report for a reminder of what fraudulent antics the big banks have been up to in this space over the past few years.
“JPMorgan is selling amid concern that banks could control prices if they own commodities as well as trade them, or suffer catastrophic losses that would endanger the financial system. The Federal Reserve said in July it might force insured lenders [ie., FDIC backed banks that should never have been allowed to speculate in this space in the first place.] to get out, and JPMorgan agreed later that month to pay $410 million to settle claims that it manipulated power markets, without admitting wrongdoing.”
Metal prices have been falling since the QE-belief rebound into 2011. This morning copper has fallen below $2.90/lb, now down more than 30% on falling global demand since 2011 (long term support is around $1.50/lb where it revisited in the 2008 meltdown). Now as speculative positions continue to unwind in metals, further downside is likely. Precious metal prices are likely vulnerable too. While gold bugs often complain of manipulation in precious metals, few acknowledge that less manipulation and hoarding is likely to mean lower (not higher) prices ahead as investment banks exit the space. Lower prices will ultimately be a help to a struggling global economy over the next couple of years. Now to corral the churn and burn investment banks from their levered and largely unfettered manipulation in the currency, bond and equity markets as well…we look forward to some, no doubt shocking, price discovery ahead.