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In the long run, the price of any given commodity should revert to the cost of producing an incremental unit of supply.
At the center of the debate are rules that would place a cap on how many financial contracts traders can accumulate for any given commodity.
In an effort to stem speculation, regulators are going to start enforcing position limits on traders, restricting the number of contracts that can be held in a given commodity.
The new rule adopted on Tuesday would enforce spot-month position limits, or limits on the contracts closest to expiration, prohibiting traders from acquiring more than 25 percent of the deliverable supply for a given commodity.
The commission's proposal for spot-month position limits, or limits on a contract closest to maturity, would prohibit traders from acquiring more than 25 percent of deliverable supply for a given commodity.
This system is known as the price mechanism and is based on the principle that only by allowing prices to move freely will the supply of any given commodity match demand.
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Wall Street has been gearing up to meet demand: a survey by Options Group, a recruitment consultant, found that the hiring rate of commodity traders is up by 33% on last year.The recent credit crunch may have given commodities a further lift.
However, economic theory suggests that in response to higher prices on normal goods, i.e., decrease in real income, rational consumers would either reduce purchases of given commodities, substitute for the cheaper ones or maintain the same level of consumption at the expense of other products.
"Pennsylvania Station is total architecture, giving commodity, firmness and delight," he wrote in May 1962.
This is partly explained by expectations of a cooling global economy and of a slowdown in China in particular although the country's fourth-quarter figures, which were stronger than expected, gave commodity bulls renewed hope.
The first step is beyond language to register, where speakers demand and give commodities, material or semiotic.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com