2011 Boots In With Commodity, Metal, Food Prices Spiked
The signs are ominous. 2010 ended on a speculative note when prices of just every other commodity spurted. Gold and Silver prices led the trend as investors flocked to secure bullion assets. Considering the mountains of debt of Europe and the US, this move looked justified as both the dollar and the euro gave enough reasons for concern. What was surprising was however the sharp rise in prices of equities and commodities leading to the hike of major asset prices as per Bloomberg.
Metals especially related to energy shot through the roof on speculative demand as an individual trader cornered 80% of the London Metal Exchange Stocks of copper as per Wall Street Journal, which accounted for almost 40% of global stocks. Similar trends were reported in aluminum and nickel where single traders moved to take dominant stakes in the futures market reportedly backed by the Wall Street Banks. The fact that the London deregulated markets have no rules on maximum position like US exchanges and the regulator FSA is known to be extremely lax in tempering speculation makes it easy for speculators, investors, hedge funds and Wall Street Banks to profit from volatility.
It was not only the London Metal Exchange that blazed away. The ICE commodity exchange at London termed famously as the London Loophole by Senator Levin and Feinstein also was on a high with cotton, corn, sugar and oil spurting on intense and heavy speculation. Brent crude hit a 20 month high closing the year at an inflated peak of $93/barrel. Cotton prices nearly tripled over the last 15 months due to no apparent reason and prices of wheat have almost doubled since April 2010 as agricultural stocks were cornered by investors flush with mountains of hot money and TARP funds facilitated by Banks and hedge funds.
Why did this speculative surge take place? The US economy, the largest in the world was going nowhere with just 2% growth reported during the quarter. The European turmoil continued as Ireland reported sick after Greece and the EU nations cobbled up emergency relief for once again. Spain, Portugal, Italy and even France are not doing famously either, unable to control their budgetary deficits. China and India the two fast growing nations looks like tripping upon inflationary trends just when the world was looking at them for relief.Continued on the next page