Originally Posted by
willflyforcash
Speculation has been the major driving factor over the past few month. A simple version of what is going on: More speculators buy futures at higher prices, more fear is created and more speculators buy higher futures, and more fear is created etc... add some vicious media into the scene and you have the perfect storm. And that, ladies and gentlemen, is what we must weather today.
Can you explain how the trading of
contracts to purchase barrels at a set price in the future influences the spot price today?
I thought futures were a hedge against future price changes. If purchasing the hedge itself can influence the spot price, doesn't that defy the purpose of hedging?
How does speculation cause a rise in commodity prices today?