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RPT-PREVIEW-Odds stacked against CFTC metals position limits

 * Hearing starts at 9 a.m. ET (1300 GMT) on Thurs
 * Metals limits seen as tougher sell than energy limits
 * Less political pressure seen for metals limits
 * Markets have higher tolerance for speculation
 * Traders worry limits would drive business offshore
 (Repeats, no changes to headline or text, adds link to Insider
video feed)
 By Frank Tang and Christopher Doering
 NEW YORK/WASHINGTON, March 23 (Reuters) - The top U.S.
futures regulator, which has struggled to gain support for a
plan to curb concentration in energy markets, could face even
tougher resistance on Thursday as it considers whether similar
provisions are needed for metals.
 The Commodity Futures Trading Commission will hold a
day-long hearing to determine whether it needs to write a rule
to create speculative position limits for gold, silver and
copper markets to prevent price manipulation.
 Commissioners will hear from metals markets players who
oppose position limits and are expected to argue that limits
will drive trade to unregulated or overseas markets.
 A group of gold and silver "bugs" who believe governments
and banks artificially depress precious metals prices are
expected to ask the commission to prevent price manipulation in
metals markets.
 Bart Chilton -- one of five CFTC commissioners and the most
outspoken in favor of position limits across all commodities of
finite supply -- tamped down support for metals curbs ahead of
the hearing, but said he remained optimistic. [ID:nN22203339]
 "At this point I don't think there is support on the
commission," Chilton said in an interview with Reuters.
 "I hope this (hearing) will be educational, informative and
it may shift opinions in favor of position limits for metals."
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
 Insider story on limits        link.reuters.com/cug84j
 Factbox on exchange-set metals position limits [ID:N23252527]
 Factbox: Speakers at the CFTC metals hearing  [ID:nN22165847]
 Take a Look on CFTC's push for new limits       [ID:nCFTCREG]
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
 Thirty years ago, the Hunt brothers of Texas were convicted
for trying to corner the silver market after they used the
futures to accumulate physical stocks, driving prices above $50
an ounce by 1980 from less than $2 per ounce in 1973.
 It was the most notorious case of U.S. metals price
manipulation, and prompted the CFTC to require futures
exchanges to set position limits for commodities outside of
grains, where the commission had long enforced limits.
 The CFTC announced in January a plan to set and enforce its
own speculative limits in oil and gas markets.
 The commission was under pressure from Congress to respond
to widespread consumer concern about energy prices in the wake
of the oil price spike in 2008.
 Three of the five commissioners --  Democrat Michael Dunn
and Republicans Jill Sommers and Scott O'Malia -- have
expressed concerns the energy proposal could drive trade to
markets outside the CFTC's jurisdiction. [ID:nN19226056]
 The CFTC will accept public comments on the energy proposal
until April 26 before weighing whether and how to move ahead.
 Some of the comments have come from precious metals bugs
who are clamoring to get similar limits for gold and silver.
 "We have 10 years' worth of evidence that the gold and
silver markets have been manipulated, and the prices have been
suppressed," said Bill Murphy, chairman of the Gold Anti-Trust
Action Committee (GATA), who will speak at the metals hearing.
 TRADERS WORRY LIMITS COULD HURT MARKETS
 Outside this group, there has been little public outcry and
political pressure for curbs on gold and silver speculation.
 Metal traders are concerned CFTC limits could sharply
reduce liquidity as investment banks, hedge funds and
commercial hedgers would reduce positions ahead of changes.
 Less liquidity would hurt producers and users who use the
markets to hedge their physical risk, said Bill O'Neill,
managing partner at LOGIC Advisors, a commodities consultant.
 "I don't expect the CFTC to take any dire actions that will
inhibit trade," O'Neill said.
 Gold and silver are mainly seen as investment vehicles,
often held as a hedge against inflation, making the markets
distinct from consumable commodities such as oil, wheat or even
copper, traditionally used to make other goods.
 That could make it hard for the CFTC to clamp down on
speculation, said Michael Greenberger, a law professor at the
University of Maryland and a former CFTC official.
 "This hearing is a little more tricky than the past
hearings the CFTC has held," said Greenberger in an interview
with Reuters Insider. "The question about whether ... to tamp
down on speculation, is really pretty difficult for the
commission to deal with."
 Traders argue metals speculation in already adequately
monitored by COMEX and NYMEX, the exchanges where metals
futures trade. Both COMEX and NYMEX are part of CME Group
CME.O, slated to present testimony at the hearing.
 "Imposing position limits will skew the relationship
between the futures market -- which is relatively transparent
-- and the physical markets, which are opaque and unregulated,"
said Jeffrey Christian, managing director at commodities
research and consulting firm CPM Group in New York, who will
speak at the hearing.
 Base metals such as copper, nickel and zinc are mainly
traded in over-the-counter markets in London and Asia.
 "I hope that (the CFTC's actions) will not affect our
markets with unintended consequences of more offshore
business," said George Gero, chairman of the Commodities Floor
Brokers and Traders Association.
 Jonathan Jossen, a COMEX gold floor trader, said he worried
the threat of more regulation could hurt liquidity.
 "They (the CFTC) are trying to go into an arena which has
not had an issue in the last several years. If somebody wants
to buy or sell gold, let them do it. You're not allowed to
corner the market as we are pretty well-regulated," he said.
 (Editing by Roberta Rampton and David Gregorio)






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