Reflexive Trading Affecting Commodity Prices More Than Ever

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A new study has been released by UNCTAD and the Swiss Federal Institute of Technology, confirming what we’ve been seeing and reporting on for a while now – that reflexive trading of commodities is at all-time highs.

According to Reuters’ John Kemp, the study shows that reflexive trading (“when prices respond to past price changes rather than new information about fundamentals), now accounts for 60 to 70 percent of price moves in the main futures contracts, up from less than 40 percent before 2005.”

Granted, the report covers non-metal commodities such as US and Brent crude oil, wheat and sugar, and it applies strictly to shorter trades rather than long-term, multi-month trends, but the basis of the research has significant implications.

Nowhere in the industrial metals sphere (perhaps silver excluded, although the case for calling silver a large-volume industrial metal is weakest than for all others) is that evident more than in the copper market.

Current Copper Prices

The copper cash price saw a 0.4 percent increase on March 27, 2013, reaching $7,630 per metric ton on the LME and making it the biggest mover for the day. Also on the LME, the 3-month price of copper inched up 0.3 percent to $7,660 per metric ton.

today's metal prices - MetalMiner IndXThe prices of US copper producer grades 102, 110 and 122 saw little movement yesterday. The cash price of primary Japanese copper continues hovering in place.

Chinese copper closed mixed yesterday. Chinese copper bar finished the day down 0.2 percent. The cash price of Chinese copper saw a 0.2 percent decline. The price of Chinese copper wire showed little movement on Wednesday. The price of Chinese bright copper scrap was essentially unchanged.