Sunil Jain: In a pig's eye

PERSPECTIVES

seeks to dispel that notion using plain common sense and sophisticated statistical tools that show no such causality. Indeed, it finds that a one percent reduction in real interest rates, rather than speculation, results in a 17.5 per cent hike in spot commodity prices 10 months later. The other reason for the commodity price spiral is their shortage "" inventory levels for commodities like zinc, corn and OECD middle distillates are down to under a month of demand. Merrill Lynch finds that while commodity derivatives have increased rapidly in recent years, they're still under two percent of all OTC derivatives. Interestingly, prices of commodities, such as uranium, have seen higher price appreciation than those which are traded in the futures markets. And among traded commodities, those which have seen huge hikes in Open Interest (which is supposed to cause price spikes, according to the anti-speculator group), like lean hogs and sugar, prices have remained remarkably stable.