Here’s Why Gold is the Commodity Above All Others

On Tuesday, the Dow (NYSE:DIA), S&P 500 (NYSE:SPY), and the Nasdaq (NASDAQ:QQQQ) all managed to save a little face as Ben Bernanke reassured markets of more cheap money for at least another two years.  Although equities and commodities (NYSE:RJI) have been witnessing a selloff over the past few days, gold (NYSE:GLD) has remained strong.  Comex December gold futures reached a new high of $1782.50 on Tuesday.

A prime example of a metal that is failing to keep up with gold is copper (NYSE:JJC).  In fact, when the Dow lost 634 points on Monday, copper posted its biggest drop in 9 months.  Copper futures for September delivery slid nearly 4% to close at $3.9615 a pound.  According to Sucden Financial, the copper decline may not be over.  A senior market strategist at Sucden said, ” Prices that dropped 9.3% in the past four sessions to an 11-week low of $8,750 a metric ton yesterday are testing a potential neckline in a so-called head and shoulders pattern.”  Dividend copper giant Southern Copper Corp (NYSE:SCCO) is down nearly 10% in the past 5 trading days, and YTD the stock is down about 39%.  Despite having gold exposure, Freeport McMoRan Copper (NYSE:FCX) is down nearly 25% YTD.

Despite gold’s success, silver (NYSE:SLV) has seen choppy trading recently.  After reaching $42.25 last week, silver traded under $38.  Silver has outperformed gold for most of the year, but the short-term weakness in silver has brought it closer to the returns of gold year-to-date.  On the positive, silver showed support at $37 on Tuesday, and with the Federal Reserve greasing interest rates for another two years, the upside is still huge for both silver and gold.  JP Morgan (NYSE:JPM) now expects gold to reach $2500 by year end, and Goldman Sachs (NYSE:GS) thinks gold will reach $1900 in 12 months.

Oil (NYSE:USO) is known as black gold, but over the past few days it has appeared to be more like a black hole.  Oil prices have fallen from nearly $100 per barrel to as low as $76 within a week.  Due to oil’s rapid decent, Apple (NASDAQ:AAPL) actually surpassed Exxon Mobil (NYSE:XOM) as the most valuable company in the United States for a brief moment.

Not only does the gold bull cycle continue to receive fuel from the Federal Reserve, but gold prices have been in a multi-year up channel that is getting steeper by the day.  Investors interested in gold should watch to see if gold can sustain a move beyond $1765.  Investors looking to take advantage of the weakness in silver miners should consider First Majestic Silver (NYSE:AG) or Endeavour Silver (AMEX:EXK).

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Disclosure: Long AGQ