Which of the following best describes the function of 'speculation' in commodity markets?

Speculation plays a crucial role in commodity markets by allowing traders to achieve profits based on expected price movements. Speculators analyze market trends, supply and demand dynamics, and other influencing factors to predict how prices will fluctuate. By buying low and selling high, speculators aim to capitalize on these anticipated changes, which can lead to significant profits when their predictions materialize.

While speculation can influence market volatility, its primary purpose is to facilitate opportunities for profit, driving traders to engage in activities based on their forecasts. This expectation of profit motives speculators to position themselves in the market, contributing to the flow and momentum of trades. Their actions can also stimulate market activity, leading to price adjustments that reflect new information and insights about commodity values.

The other functions described in the alternative choices, such as providing liquidity or hedging against losses, are also significant in the market but are not the main focus of speculation. Instead, they represent different strategies and roles that other market participants, like hedgers and liquidity providers, engage in.