Commodity Prices Rebounded

The London Metal ... has decided to take no further action to regulate copper ... after panic ... on June 6^th triggered a 16% drop in the price of copper for ... in three months. Last week it doubled margin payments to $400 a tonne, to calm the market. ... rebounded from a two-year low of $1,900 a tonne to $2,265 on June 7^th. ... has been locked in a struggle between big ... and the commodity funds, and there have been rumors of market manipulation. The Inter­national Wrought Copper Council which represents both pro­ducers and ... has given warning that volatility (1) could put small traders off using....

Note:

1. rebound - відкотитися назад

2.volatility - непостійний характер споживацького попиту

Ex. VI Answer the following questions:

1. What is a commodity exchange?

2. What commodities are traded on commodity exchanges?

3. Do physical commodities ever appear on commodity markets?

4. How are they defined?

5. What are the principal aspects of the commodity market?

6. What is a spot market?

7. What is a spot price?

8. What is a forward market?

9. What price for a commodity will the parties fix if they believe that the price of that particular commodity will rise?

10.What is a futures market?

11 .What does the investor do on the terminal date of the contract?

12. Does he always sell the contract at a profit?

13.What is hedging?

14. Why does a certain percentage of the value of the Contract have to be deposited with the broker? 15.Speak on the 'short' and 'long' positions.

16. How can both investors who are short and long offset the contract?

17.What is an option?

18. What large commodity market do you know?

Ex. VII Do the task in written form:

1. explain the difference between the forward and futures contracts;

2. give your point of view on hedging;

3. write about the role of the clearing house when futures contracts are made.

Ex. VIII Read and translate the text.

Gold Behavior Puzzles

The annual Financial Times Gold Conference opens in Venice today and not for the first time some delegates will be scratching their heads about the behavior of the previous metal's price.

To some extent, all metal prices are being affected by the high deposits being demanded of copper traders. The London Metal Ex­change has raised the initial margin on copper to an unprecedented $600 a tonne compared with the usual $200. The London Clearing House has taken in an extra $9,5bn and some other metals have been sold to provide this cash.

Also, traders pointed out that some computer trading systems link copper with silver and when copper falls so does silver. Similarly, some technical traders link silver - which reached a 15-month low (1) last week at about $5.10 an ounce - with gold, hence gold's weak­ness in recent days.

This is all disappointing for those gold bulls (2) who had hoped that the metal would have broken through $400 by now. Their opti­mism comes from the big gap last year between demand for physical gold and conventional supply (3) - mine production and scrap.

The Gold Field Minerals Services (GFMS) suggests it (the gap) was filled by record hedging of future mine production and sales by central banks.

Notes:

1. a 15-month low - найнижча ціна за останні 15 місяців

2. a bull - маклер, що грає на підвищенні цін, «бик»

3. demand and supply - попит та пропозиція

Ex. IX Do the task:

1. Speak about a commodity exchange without going into detail, just its general characteristic.

2. Discuss with your group mates peculiarities of:

1. spot contracts;

2. forward contracts;

3. futures contracts;

4. options contracts.

What are their strong and weak features? How can an investor protect himself against a possible loss dealing in either of these contracts?