Parliamentary Committee Advises Govt to Probe Metals Speculation

Source: Reuters, Silvia Antonioli (5/24/11)

"A number of 'strategically important' metals have shot up to record price levels."

Reuters, Silvia Antonioli

The government should probe whether metals markets with high levels of speculation and volatility are an acceptable way to bring strategic commodities to end users, a parliamentary committee advised.

The science and technology committee has expressed concerns over reports of hedge funds buying up significant quantities of metals, which may exacerbate price and supply volatility for some metals that are "strategically important" for the economy.

Metals that have a vital role the economy's future, according to the committee, are rare earths, the platinum group and other main group elements such as gold, nickel and strategic metals antimony, cobalt, titanium, gallium, magnesium, indium, germanium, chromium, vanadium and tungsten.

"It is well known that hedge funds have moved into all commodities, whether it is gold or energy," Charles Swindon, Chair of the Trade and Lobby Committee, Minor Metals Trade Association, told the science and technology committee.

"Sadly, they have also moved not just into exchange traded instruments, as traded on the London Metal Exchange, but there is evidence that they have moved into more strategic metals, which are only traded between counterparties."

Financial investors say there is no proven link between the entrance of speculators to a market and increased price volatility.

A number of metals, included in the strategic metals list drawn by the committee in its report issued last week, have shot up to record price levels lately due to poor supply availability and increased demand.

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