If the investors or speculators on the futures markets have been the prime movers in the price of commodities (and there are arguments for and against on their affect) then maybe the 3rd quarter could see a long awaited adjustment in metals, oil and agricultural commodities according to a Reuters report in Mineweb .
The main point of view is that speculators are moving from an overtly bullish long position to a more cautious wait and see or even bearish short position. Shorts have increased in the market over the last couple of weeks and analysts at New York MF Global said that if forced to choose they would take their chances on the short side, meaning they expect on balance prices to come down. The strength of the bounce in lead, zinc and nickel this week following power related problems in China was more down to the short covering trade stops (that automatically applied buy orders) than real market sentiment, as witnessed by the prices dropping back the next day.
So much of the rise in commodity prices has been influenced by the gradually weakening dollar and maybe the current resiliance in the currency’s position against the Euro has made speculators reassess their positions. With demand growth softening- even in the developing countries- it will be interesting to see if speculators take their profits and prices gradually fall as the rest of the year unfolds.