Steven Thacker

Speculators Driving Up Commodity Prices? Hardly

Hold on. Buying futures DOES increase the price of the underlying stock or commodity. Lets say a very rich individual buys many millions of dollars of futures contracts for coffee, causing the price of the future to increase markedly. If there is any significant difference between the current spot price and the future price, then anyone could perform a riskless arbitrage by stockpiling the good or stock now and selling or shorting a futures contract. This would have the effect of increasing current spot price.