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Role of Speculation-A False Confidence in the Commodity Market

Author Affiliations

  • 1Baddi University of Emerging Sciences and Technology, Baddi, Solan, Haryana, INDIA

Res. J. Management Sci., Volume 1, Issue (2), Pages 24-28, September,6 (2012)

Abstract

The term speculation is known as the practice of buying at low prices with the intention of selling later at a higher price. Speculation periodically becomes the subject of intense debate. One claim that speculation, especially in the form of short selling, leads to higher market volatility. Another claim is that speculation leads to unjustified drops in price, in late 2008, the Securities and Exchange Commission imposed a temporary ban on short selling of the stocks of certain financial institutions. But the problem is not always short-selling. It is commonly stated that speculative buying by index funds in commodity futures and overthecounter derivatives markets created a Fizz in commodity prices, with the result that prices, and crude oil prices, in particular, far exceeded fundamental values at the peak. Speculators sometimes are accused of causing unjustified rises in prices. Speculation has always been criticized in the popular language and political discourse, such as to make easy money at the gaming and gambling, also has been made responsible, especially when linked to hoarding, to produce higher prices and thereby harm consumers. This paper is an effort made to draw the attention on the urgency need of speculation and its role in trading system especially in oil, gas and food prices. In this paper, it is concluded that speculation has tremendous impact on the economic growth and the economic system. The researcher focuses on the need to initiate actions to control gambling so that the currency rate can be in bar.

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