On Feb 17, 2011, at 11:03 AM, Michael Pollak wrote:
> On Wed, 16 Feb 2011, the Pollin/Jayati transcript was quoted:
>
>> POLLIN: When they move the futures market, that pushes the spot market up--the futures market is driving the spot market prices.
>
> This is the crux, and I want to believe it -- it seems empirically true -- but I don't understand the causal chain.
I don't understand your confusion. If the futures price rises, of course the spot price is going to rise. It means there's someone willing to pay higher prices, at least for now, for the underlying commodity. Arbitrage will force the prices to move in tandem.
But despite the gravitational pull of the futures price, the cash price can still lag. See that Senate report, around p. 60, for an example.
Doug