In a recent article (Tilton et al., 2011), we argue that even when investor stocks are declining an increase in investor demand can cause a commodity's price to rise, a conclusion that is both contrary to conventional wisdom and counter-intuitive. In his comment on our article, Olle Östensson...

This, our second reply to Östensson, supplements our earlier more technical analysis with a simple intuitive explanation of how investor demand can be driving commodity prices higher even when investor stocks are falling.

In their recent article, Tilton et al. (2011, Resour. Policy, 36, 187–195) contend on the basis of conceptual and theoretical arguments that spot and futures prices for metals and other commodities should be closely correlated during periods of strong contango and much less correlated during...