WSJ.com - Midas Touch Fades

And just in case you can't read this article, I've taken a quote they use from David Gaffen:

3:24 p.m.: Sure, stocks have been volatile of late, but it's nothing compared to gold, which in the last week-plus has lost 9% of its value, closing down today $22.90 to $656.70. Jim Vail, manager of the ING Precious Metals Fund, believes some of the pullback can be attributed to a tailing off of speculative interest in the commodity, along with some technical factors, but he still believes the fundamental picture points to eventual rallies in gold once again. "In the three weeks of May nothing has changed," he said. "It's just a long-needed correction to get the hype out of the market."

-David Gaffen

Bubble Measurements

12:13 p.m.: How much of the run-up in commodities is due to speculation? A lot, analysts say. Richard Bernstein, chief quantitative strategist at Merrill Lynch, estimated in a recent note that prices of commodities at the end of April were about 50% higher "than they would be if prices were based on fundamentals." He fingers ample liquidity as the primary driver behind the moves in commodities such as gold, silver and copper, and also reiterates an earlier point that prices of commodities traded on futures markets have sharply outperformed those that do not have a futures market. Jim Bianco of Bianco Research says that the money flowing into commodities is coming from long-term investors like institutions trying to find an asset that is not correlated with stocks and bonds. Speculative positions in assets such as copper have dropped off in recent weeks and as of last week, speculators were actually short copper.

Darin Newsom, senior commodities analyst at DTN in Omaha, says investment demand may be driving commodity markets higher, but not every market is in a bubble. Gold and silver, yes, but copper, no, he says, because fundamentals, such as economic growth in China and India, justify higher prices for that industrial metal. "We all know investment-driven spikes don't last as long, but in these markets like copper, unleaded gas, and corn, where you've got these longer-term demand shifts, we may indeed be establishing new price ranges that don't reflect a bubble but a long-lasting change in the dynamics," he said.

-David Gaffen

And always keep in mind that you can't get to caught up in day to day news: Chet Currier writes in Bloomberg that it's perhaps time to relax a bit if you're a long-term investor. "To keep the kind of perspective and patience necessary to be a true long-term investor, I can't get bogged down in too much ephemeral detail," he writes. "If I focus too intently on every threat that rears its head in the day-to-day economic news, I never run out of reasons to put off risking my money in anything more variable than a Treasury bill." -David Gaffen

I hope you guys found these quotes interesting and this article valuable.

WSJ.com - Midas Touch Fades