Gold Is the One Asset Investors Want as Commodity Prices at the Mercy of Economy

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Bill O'Neill, partner at LOGIC Advisors: "The key is confidence, confidence, confidence. And until we get some change there, the atmosphere for gold is going to continue to be very positive, and copper and the base metals is going to continue to be negative."

Further declines in oil and metals prices after coordinated global interest rate cuts suggest that commodities will not return to their giddy heights until the world economy is on more solid footing.

Wednesday's performance also undermines the theory that commodities move independently of other markets. This argument made sense on days when oil and metals prices rose and equities fell but becomes less meaningful when they slump together in the current financial crisis.

"The primary difference we have here is the change in worldwide investor psyche," said Adam Sarhan, founder of New York's GlobalMacroResearch.com.

"Just months ago, we had a strong, booming global economy. Now, all that has changed and people are panicking and taking any risk they can off the table -- and that includes commodities," Sarhan said...

The dollar fell again after Wednesday's rate cut. But oil and copper hit new multimonth lows this time and grains like corn and wheat joined the slide before rebounding in late trade.

The only market that rallied throughout the way was gold -- the one asset, other than cash, that investors seem to want now.

"The key problem still exists even with this rate cut," said Bill O'Neill, partner at LOGIC Advisors in Upper Saddle River, New Jersey. "The key is confidence, confidence, confidence. And until we get some change there, the atmosphere for gold is going to continue to be very positive, and copper and the base metals is going to continue to be negative."

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