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JP Morgan’s short positions on silver may just blow up in their face. As the price of silver climbs, claimed to be manipulated downward by JP Morgan, the banking giant may lose a lot of money if reports if their short positions are correct. Many analysts see these factors as nothing but positive for the price silver as investors look to ‘poor mans gold’ as a play against current monetary policy.
By Michael Montgomery—Exclusive to Silver Investing News
A recent article by Max Keiser, in The Guardian exposed JP Morgan’s positions in silver, claiming that the bank is acting as an agent of the Federal Reserve, holding down the price of silver, to buoy confidence in the US dollar. “A lower silver price helps keep the relative appeal of the U.S. dollar and other fiat currencies high. By selling massive amounts of paper silver in the futures market, JPM has been able to suppress the price of the precious metal,” reported Scott Rubin for The San Francisco Chronicle.
JP Morgan also holds massive short positions in silver, according to the Article in The Guardian, upwards of 3.3bn ounces. The company is under investigation over silver price manipulation after whistleblowers alerted the CFTC in November 2009. If the price of silver remains high, or goes higher still, JP Morgan stands to lose a lot of money. It all is a self-fulfilling prophecy of sorts, if investors lose confidence in the US dollar and buy more silver, JP Morgan will lose on their short position, causing investors to lose even more confidence in the US dollar, causing them to buy more silver.
All of this is good for investors in silver as the price has been artificially manipulated downward. Industrial demand for the metal remains high, and supply issues in the future will most likely drive the price higher still.
“But, even if we disregard the potential of a short squeeze in the market, the demand/supply dynamics for silver are looking incredibly bullish. It now appears that significant physical silver shortages are developing in the marketplace and the metal is being sold well over spot where it is available. And, if you add the increasing demand from investors around the world, it is logical to assume that the price has huge upside potential,” stated David Levenstein, for Mine Web.
A major development for the gold and silver markets in the future is the creation of ETF’s in China. The Asian nation has been reluctant to offer ETF’s as an investment, but it seems that this is changing, opening up huge investment potential that will undoubtedly drive prices upward.
In an article on Commodity Online stated that “China is going to get its first Gold ETF to begin with soon. It will be followed by ETFs in Silver,” the report followed to say that “Last week, the Chinese government gave regulatory approval for Lion Fund to launch the Gold ETF under the country’s Qualified Domestic Institutional Investor scheme (QDII), which enables participants to invest client’s money overseas within set quotas.”
This expansion of ETF’s into the Chinese market has vast potential to increase the level of investment from individual investors that see the physical holding of silver and gold as a major barrier. China has also relaxed rules on owning gold, as a result “Gold imports into the country have soared six-fold since the start of 2010,” noted analyst Bart Melek BMO Global Mining. The change in Chinese policy will, more than likely, affect these markets in the coming year.