Answer: Because Speculators Don't Cause Prices to Rise
The chart shown here is a small excerpt from an article written by John Mauldin this weekend. It shows the price escalation of exchange-traded versus non-exchange traded commodities. The funds that are not traded via futures on an exchange, which haven't attracted the attention and investment of speculative traders, have risen much more rapidly and to higher prices than the futures-traded commodities. If speculative funds had influenced prices to rise, the opposite would have been the case. Exchange data also supports this conclusion, since the minority speculative positions are equally divided between longs and shorts.
Erroneous assumptions cause erroneous conclusions.
Erroneous assumptions cause erroneous conclusions.
In his excellent newsletter published this weekend, John Mauldin wrote a superb article on the subject of speculative trading and its impact on commodity prices. He presents both sides of the argument without bias, and then proceeds to analyze the various viewpoints. He then also presents a fascinating scenario of both the short-term and long-term probabilities for prices of crude oil moving forward. He also presents a fascinating case about why Iran may be parking millions of barrels of oil in tankers off its coasts, keeping much of the world's tanker supply tied up, and what will be the impact on oil prices. It is a very interesting write-up that I strongly recommend. This is a "must read" for anyone who wants to be informed on the subject without bias. It can be found here:
Whither the Price of Oil? by John Mauldin
Great isn't it?
Mauldin's conclusion, in the end, is that "coincidence is not causality".
