The role of commodity exchanges in price rise

June 18, 2008 10:15am CST
The role of commodity exchanges where you can buy anything from rice and wheat and pulses to crude oil has to be looked into to see how much they have contributed to the price rise. When I use my funds to invest in rice, I make sure that a certain quantity of rice goes out of the market (kind of hoarding), even though I am not going to consume it. Most of the investors in rice wouldn't be able to do so anyway. Big fishes may invest anywhere between $2500 to $100,000 and even more. Can one family consume tonnes of rice in an year! When so many profiteers invest money like that in a commodity, they artificially increase the demand. Look at it, there is one type of demand that arises out of need to consume. This one is just for holding till they can make some profit. And these profiteers have huge funds. I wonder whether because of them, the demand may have doubled for almost all commodities. That is, there might be as much demand for investment as there is for consumption. And we may not be the best economists, but we do know that prices increase in the same proportion to the demand, if the supply remains stable. Other way to say it is that by hoarding a commodity by investing in it, they are reducing the supply which again helps them as that results in price rise.
1 response
@cncoke (439)
• China
20 Jun 08
In China we felt the role of commodity exchanges a little.The commodity rises price lightly. petrol is still the price for a few months. the meat ,rice,wheat is changing a little.Although flood took place in south and earthquake in Sichuan,the price of comodity is very stable.The people are feeling happy and comfatable to meet the sport meeting.