Forget Speculators, Index Funds Could Be Real Culprit Behind The Commodity Price Surge

Gillian Tett

The growth of index funds, and not speculators, may be behind the sharp rise in commodity prices, Gillian Tett writes in the Financial Times.

Summary: Speculators have often been accused of manipulating commodity prices, causing chaos in those markets. Recent data suggests that price volatility, and the overall trend of rising prices, may be the fault of the the rise of index fund investing, rather than speculators. Since 2004, new investors moved into the commodities markets through index funds looking for ‘uncorrelated’ assets. Now those uncorrelated assets have become correlated, suggesting index funds are the root cause of recent problems in the commodities space.

Read the full story at FT >

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