I believe that investment funds have had a disproportionate effect on commodities markets over the past five years. Restrictions on the holdings of commodity futures and swaps by investment funds could have an enormous effect on commodity prices and the stocks of commodity companies as well as resource-based economies if the US government restricts trading in commodity futures.
U.S. regulators say they may clamp down on oil and gas price speculators by limiting the holdings of energy futures traders, including index and exchange-traded funds.
The Commodity Futures Trading Commission will hold hearings to explore the need for government-imposed restrictions on speculative trading in oil, gas and other energy markets, Chairman Gary Gensler said today in a statement. The agency didn’t say when the hearings would start or who would be asked to testify. ...
“Our first hearing will focus on whether federal speculative limits should be set by the CFTC to all commodities of finite supply, in particular energy commodities, such as crude oil, heating oil, natural gas, gasoline and other energy products,” Gensler said in the statement. “This will include a careful review of the appropriateness of exemptions from these limits for various types of market participants.” ...
Gensler said in a letter to lawmakers earlier this year that speculators contributed to an asset bubble in commodities in 2008. His statement broke from former CFTC Acting Chairman Walter Lukken, who testified to Congress on Sept. 11 that there wasn’t “strong evidence” index traders were driving up prices.
If this goes into effect, one must consider the secondary and tertiary effects that would certainly come into play. What would happen to the Canadian dollar? How would that effect the US consumer? Do you still want to speculate in Calgary real estate? Would funds pull all their commodity investments out and what would happen to base metals prices? Such a decision could be wide-ranging.
I am short oil.