Oil is kind of a super commodity. It directly affects the prices of other commodities. As for gold, people buy it for the same reason kids go home to mamma, for security. It's considered a stopgap against inflation, so it stands to reason that gold will go up when inflation does. Rising oil prices will cause inflation to go up and that will push gold up as well.
The price of oil "tumbled" today to "only" $138.50. I'll bet you it won't matter, it won't stay down (if oil could be said to be "down" at 138 in the most meaningful sense of the word). It will be up above 145 again by the end of the week (or by tomorrow evening). It may even surprise me and stay below 140 for a few days. In the end though it won't matter, it will keep moving up. I hope I'm wrong, I wish I was, but I don't think so, I think we're headed to $200/barrel territory.
But not really. All currencies are based on commodities. You have to ask yourself how do you protect yourself against the supply of dollars increasing...or even how are investors protecting themselves.
The answer is to invest in a different currency. Commodities are a form of currency (directly such as GOLD or silver or wheat.) They keep their value when the dollar is destroyed (mostly.) The other choice would be foreign investments (which have been doing well lately if you invest right.)
The third choice would be the futures market which is what Buffet as been doing with all his money (hedged against the dollar.)
So commodities are up broad spectrum this year all against the dollar. Investors think there is a bubble (and who knows maybe there is but I don't think so) but if you make the assumption that Bernake has the interest rates pegged artificially low (a good assumption in my opinion) when it's possible that he should have it set at 10% or higher, then the supply of dollars is going to keep on coming in, and commodities will keep rising.
IMHO
