Only One Game in Town - Commodities

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Gold, platinum and silver are 9% to 15% from their all time highs. The great conundrum is that investors have increasingly less confidence in producers of commodities; they want to buy the commodities, or proxies of the commodities.

European Central Bank President Jean-Claude Trichet was less hawkish in comments than expected when he raised policy interest rates to 4.25% from 4% on Thursday, giving the dollar a lift and knocking oil - somewhat - off its record perch. The gold price swooned immediately by more than $15, trading below $930 an ounce, and investors across the world went wild all over again, trying to put their grubby fingers on the next Holy Grail.

Like all central bankers, Trichet walks a thankless path. One of his main pre-occupations ahead of Thursday's hike, the first for the ECB in 13 months, was obtaining consensus from the PIGS (Portugal, Italy, Greece and Spain), given that those economies are on track for a period of below-trend growth. Across the Atlantic, the US domestic economy has been pushed into recession, shoved half into the gutter by the housing bust, weak-to-wobbly employment and red hot face winds from ebullient energy prices...

For the moment, pork bellies are also out, along with cotton, robusta coffee and palm oil, but cocoa is running close to record price levels, along with the world's two dominant base metals, copper and aluminium. Gold, platinum and silver are 9% to 15% from their all time highs. The great conundrum is that investors have increasingly less confidence in producers of commodities; they want to buy the commodities, or proxies of the commodities.

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