Are speculators driving up commodity prices?

Question

Is there any solid evidence that speculators are driving up the prices of commodities such as corn, wheat and oil?

At the moment, many arguments against speculators seem very emotive. Are there any solid statistics that prove that speculators are really to blame?

Answer 1

Goldman Sachs is an investment firm that has been investing in oil futures for quite some time.  Their traders buy, buy, buy and hold these long positions.  They want the market to go up b/c of their Long position. Then GS gets their analyst on MSNBC to report that 'GS expects oil to hit $150 by the end of the month.'  This creates a stir and investors react accordingly.  But the point is:  Goldman Sachs is promoting their position and they don't have to disclose that, unlike stocks.  A typical trader/speculator, who is trading for him/herself, buys and sells alot and provides liquidity which is a necessity of any market.  I'm not saying GS is too blame for everything but I think it is a little shady.

Answer 2

i dont no about statistics youve mentioned but i think that argument is sheer bull for two reason.

1) it's moot blaming something that's part of the economy.

2) no speculators can survive a position without fundamental factor. fundamental players (ie hedgers, producers, suppliers; OPEC) carry the longterm positions. if anything they are the ones in charge of the long term move. specs just buy/sell, turn up their positions in matter of minutes, days, weeks. How can they keep on boosting the price for as long as few years now? they have no effect on the price. their just supplying liquidity to the market just that. supplying oil to a big wheel. the motor is the fundamental factors: lack of oil, greater demand for food due to growing population and corns directed to bio fuel.

Without the long term influx of money due to fundamental factors, the price of commodity cant be flying straight high for ages!

those guys you refering to are just getting emotional, plus some of them dont even know how the price are made. they might not even grasp the idea of supply and demand.

Answer 3

speculators  NOW are the main reason of commodity prices increase

oil prices are determined according to NYMEX , IPE

when speculators enter the stock market they buy contracts aiming that their prices are getting higher in order to make gains, i can't deny that market factors are the main driver of the prices direction, but now speculation controls the greatest part of it

oil market is  hyper-sensitive to any thing

at Jan, 8 Richard Arnes ( speculator) bought a1000 bbl ( the min .limit of oil contract) by 100 $/bbl and then lost 0.006 $ in each bbl just to be the first man who made oil price breaks $100 limit

Now, supply exceeds demand, inventory level is adequate

increasing demand decisions wouldn't have the same effect as before, once again when Sadia Arabia announced that it would increase the daily production level by 200,000 bbl crude price decreased by only 4$/bbl at the same day

and 2 days later it returned to same level again and it still walks the 150$/bbl road

i still belive that market factors plays a major rule ( china high demand, geopolitics like Nigeria and Iran, etc)

but if the demand increase factor would help prices to increase by $5 , speculators would work on this reason in order to make it increase price by $9

(NB, speculators don't owe actual quantities) and they are the main beneficiary of oil price increase as they hedge against deteriorating dollar value and inflation, that's why they are turning their dollars into comodities