>>given you only need to put up about 8 percent on margin for commodities futures, you can leverage the bejabbers out of any cash you put in. <<
That 8% leverage sounds great when price is rising, but it magnifies losses as well as gains. Speculators can lose much more than their original investment. Since the risk is so great, it is more prudent to speculate based upon actual fundamentals. One wrong guess and you’re out of business.
That’s why you see hedge funds disappear overnight.
Given that pension funds are investing on commodities index funds, that means they can be in for a very rude surprise if this happens.
But my main point was that somone with a 100 million dollars in cash can leverage that to over a billion in commodities positions. Makes market manipulation by speculation much more possible than the raw cash figures indicate.