Commodity Online
NEW DELHI : United Nations Conference on Trade and Development (UNCTAD) in its latest report said price movements in global commodity markets do not reflect the fundamentals and show excessive speculation.

Amid a debate in India whether speculators in futures trading are fuelling food inflation, the report said, " In recent year’s speculation may well have become excessive, amplifying price movements to such an extent that they no longer reflect market fundamentals".

UNCTAD quoted a report of the US Senate on oil market as saying: "Although it is difficult to quantify the effect of speculation on prices, there is substantial evidence that the large amount of speculation in the current market has significantly increased prices".

Several analysts have estimated that speculative purchases of oil futures have added as much as 20-25 dollar per barrel to the current price of crude oil, it said.

In India, the government has banned futures trade in several commodities such as wheat, rice, tur, soyaoil, rubber and chana to contain price rise.

Highlighting the impact of futures prices on spot market, UNCTAD report stated that speculative activities in commodities futures trading affects spot markets only in terms of price expectations.

A sustained rise in futures prices encourages physical traders also to engage in speculative activities, it said, adding that futures prices are one criterion that guides spot prices.