Actually, guys, for today anyway, the news was partially correct. Oil came off cause all the other commods were coming off, but also cause stocks were getting hit so hard. It usually comes off when stocks get nailed. Pit trading was closed when stocks rallied back up. It wouldn't have gone all the way back up anyway, however. Oil has gone up 60% in the last 6 months. Is this because of supply and demand, an increase in China use maybe? Absolutely not! Its due to the dollar getting hammered in the last 6 months. Oil is not moving according to fundamentals at all. It came off today not because of fundamentals either, which is why I say the press is partially correct. but mostly wrong.
While the weak dollar has no doubt had some effect on oil prices, it can only explain a small percent of the rise. US dollar index was at 78 6 months ago, now it is at 72. That's less than an 8% decline over the same 6-month period where oil is up 60%.
All I can say is that, yes oil and commodities and gold could go up more, but it seems foolish to pile in as an inflation or dollar hedge at these rates. The downside to these could be breathtaking, if a world recession.
The downside could definitely be awesome. (and eventually will be when the bubble goes pop). Timing it is the key however, and I doubt one big day of selling means a top in commodities. Lets have a 2 month sell of, followed by a rally, and failure to set new highs. THEN, I'd be calling a top. Assuming the dollar isn't still tanking, or commodities start getting priced in Euros!
try an overlay of the USD index and crude for the past two years. The correlation is almost perfect (negative that is). Crude moves a larger % of course, but when the buck drops, crude rises. This is what it should do by definition since it is priced in dollars. Recently, we have not seen any big demand increases in crude, but its been a rocketing. This is due to the dollar, and speculators jumping on board.
Temp pull back in oil. I would say buy as much as you can however, I think we could pull back even closer to 100 for a breather. OIL IS NOT EVEN CLOSE TO LOOSING STEAM.
I don't doubt that a correlation exists; I'm just saying if it was as simple as "of course crude goes up because it takes more dollars to buy a given amount of it" then crude would only be up 8%. Why would it be more than that? Of course, if it is going up mainly because whenever the dollar goes down, people come in and use it as a hedge against the falling dollar, that would be logical. But then the cause wouldn't be because the dollar is going down alone - it would be because when the dollar goes down people hedge by buying crude oil. It seems like a subtle distinction but I think it has important implications. If it was really "just the dollar", it would imply that crude will always go up a given amount for every percent fall in the dollar. But if it is "people hedging and speculating because of the weak dollar", that would imply that it will only continue to go up that much as long as hedgers/speculators don't find something better than oil to reduce dollar risk.
You can see how much of crude and other prices is speculation when there is an event and everyone moves to bonds. It was very clear when the London bombings news brke. Commericals/hedgers don't unwind their position on this sort of thing.