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A more rigorous evaluation of these data demonstrates that, even if one accepts that any correlation between speculative activity and price movements means that the speculation caused the price movement, and speculation drove prices away from their appropriate levels, the noncommercial trader position data do not support claims that speculation forced commodity prices sharply higher in the period ending in the summer of 2008.
Noncommercial traders are those who do not handle physical commodities in the ordinary course of business.
The long position of the noncommercial traders is at all-time high levels, which provides for an extremely limited potential of building up the long positions, which will hold back the quotes strengthening.
This was shown by the figures in the Commitments of Traders report released last week by the US Commodity Futures Trading Commission, a closely watched data set which shows the relative buy and sell positions of the largest commercial and noncommercial traders.
Noncommercial traders are described as speculators, or firms taking positions in the futures market not as a hedge but as speculation on exchange rate movements.
The distinction between commercial and noncommercial traders is based on how firms identify themselves to the CFTC, which in turn monitors firms to verify their self-designation.
The trend has been down, Saal said, noting that noncommercial traders were net short over 35,000 contracts as of May 17.
The study was undertaken in response to public criticism last year from large end-users, including Huntsman Chemical, a major global manufacturer of diversified chemicals and a large natural gas buyer, about high gas futures prices, increasing price volatility and the growing market participation of noncommercial traders (including hedge funds) -- which are those traders who cannot make or take physical delivery.