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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 375.93-1.8%Nov 14 4:00 PM EST
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To: captaintime who wrote (7201)6/14/2006 12:35:04 AM
From: energyplay  Read Replies (1) of 217785
 
I think the central bankers REALLY want to stop inflationery expectations - I would not be surprised is the central bankers pretend to ease off, then slash back, trying to catch hedge fudns and specualators getting back into commodities.

I think they also want to deter instituions from allocating large sums to commodities.

WHY ?

The commodity producers, say for copper, have certain costs, and need to cover that and a large premium to expand production.

The manufacturers who use copper will pass the cost on to the consumers and industrial users, which shows up as inflation.

When hedge funds and instituions get in between the producer and manufacturer, the markets are tight enough that they can make large gains just sitting on the commodities.

The more commodities are kept off the market, the higher the price goes - effectively a market 'corner'. This is an inflation machine - buying commodities pushes up commodity prices. The profits of the commodity hedge funds then attract more money.

Institutions see rising commodity prices, and decide to allocate more to buying commodities as a hedge against inflation.

There's not a lot of economic value added by this excessive specualtion - it far beyond what is needed for liquidity, price discovery, and forward sales and hedges by mines for financing.

If the central bankers feel they need to "FIX" the tight demand in commodities market...then they will persist until there is damage to end demand of the real economy.
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