Another little thing to consider as regards funds and their recent 'activities' in the commodities sector, is the trend toward heavier regulation, more frequent and detailed reporting, and an augmented degree of visibility.

Not exactly what they were looking for, but, hey, this is the post-crash era, no? Then again, one cannot say that some of this was not self-inflicted (see $150 oil)... BNP sums it up with a tidbit from the world of natgas - however, feel free to substitute that word with any softs, or metals, at will:

"The announcement by the United States Natural Gas Fund (USNGF) that it will preemptively rebalance its portfolio of natural gas investments in anticipation of a CFTC clamp-down on position sizes, by reducing positions in listed natural gas futures in favor of increasing holdings of over-the counter natural gas swaps, is a sign of things to come.

Regulatory zeal has just become one more thing to hedge against. Inevitably, some will do it more successfully than others. The USNGF managed to re-jig its portfolio to include such a so-called "regulators' hedge", while retaining a majority of its holdings in listed natural gas futures; smaller funds might find this sort of move more difficult to pull off. But tighter regulation will simply spur hedge funds to more...sophisticated ways of handling business."

For funds, it has been: "Games without frontiers", thus far. But, it may not be "war without tears", going forward. With apologies to Peter Gabriel.

Jon Nadler is Senior Analyst, Kitco Metals Inc.

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