Speculators are important link in markets and also help in efficient price discovery and price-risk management. In experts' opinion, speculators are important links as they add depth and liquidity to the commodity markets.
#2: Understanding the commodity market is very difficult.
But in experts' views commodities are traded globally and the factors that affect commodities is basic economic factors and seasonal cycles.
#3. Lack of assurity about the quality of commodities delivered.
In experts' views commodities delivered within the final validity period are of standard grade and quality.
#4: Commodity markets are highly volatile.
It is believed by market experts that commodities are no more volatile than stocks if we remove the leverage.
#5: Lack of transeperancy seen in commodity exchanges.
But commodity exchanges promote price transparency. By providing futures trading in far-month contracts, exchanges provide price signals.
#6: Difficult to make money in commodity trading.
This happens only when market participants do not trade with discipline and started showing greed and fear resulting huge loss.
#7: Commodity trading is only for large traders & HNI's.
It is not the case that the commodity market is only for investors who have a lot of spare money. In Indian commodity markets, lot sizes are low and any retail investor can participate by paying a small margin.
#8: Delivery Of Commodities is compulsory.
It is a myth and it is not necessary to take delivery as long as the trader squares off his positions before the contract's expiry. Only commercial players like hedgers and arbitrageurs take delivery.
#9: Belief that commodities are easy to manipulate.
Most commodities that are traded across the world hence it is not easy to manipulate the prices of commodities. Manipulation is not applied to essential commodities but it can be applied for liquid commodities.