Whatever the reason, this movement of investors into commodities was facilitated by financial innovations – notably, the emergence of index funds and, later, a variety of exchange-traded funds (Chart 3). More recently, high-frequency trading has also become a feature of commodity markets, as it has in financial markets.
Admittedly, it is the nature of financial markets that perceptions of risk evolve over time, resulting in at least some degree of price volatility, even in those markets perceived as among the safest. Policymakers cannot completely eliminate financial market volatility. Yet in the recent past, some emerging countries have used specific tools to try and limit the extent of such volatility.