> Okay, so this is telling us that *commodity funds* received $60bn in net inflows. They used that money to buy commodities contracts, I'm assuming. That made them buyers. But who sold them the commodities contracts? Sellers, of course. So the net flow into commodities contracts was zero.
So you're telling me that an inflow of $60b into commodity funds from buyers who weren't there before won't tend to drive prices higher? Really? Especially when the buyers are intending to stick around - a lot of this money was index funds, which have to stay invested as long as their clients don't start cashing in? And were not present in the market before?
Sure they have to buy it from another holder. But at a higher price than that holder probably bought it. Yes, the psychology of expected valuation contributes to the price rise, but there's nothing like a flow of scores of billions to stimulate psychology. The flow of money into the market drives the valuation of the stock of assets higher. When the money flow slows, the bubble will pop, and money will exit for some other asset.
Here's some testimony by the hedge fund manager Mike Masters: http://hsgac.senate.gov/public/_files/052008Masters.pdf.
Doug