Reply #27: Commodities: a minor setback or full-blown retreat?

[UpInArms]

http://www.marketwatch.com/News/Story/Story.aspx?dist=newsfinder&siteid=mktw&guid=%7B75CC641D%2D9544%2D4174%2DACBC%2D225418DE6D3C%7D&symbol=&print=true&dist=printTop

SAN FRANCISCO (MarketWatch) -- If something was on sale but still costs 65% more than it did a year ago, would you buy it?

That's exactly the dilemma traders are grappling with in the commodities markets -- wondering if prices have peaked, are headed for a steep correction, or just experiencing minor setback before moving even higher.

Gold futures rose to an almost 26-year high of $728 an ounce on May 12, up from around $440 a year earlier. Oil echoed the steep climb, peaking at a record above $75 per barrel on April 21 to trade nearly 40% above the same date a year ago. See a gold chart. See a crude chart.

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Doelling predicts some sort of "catastrophic event on the horizon" -- whether it's a meltdown in the global financial markets, a hedge fund debacle or a "geopolitical" event -- to spur a great deal of buying in precious metals.

"When it occurs, the precious-metals markets will surpass all of the historical highs and reach levels that are beyond belief," he said. "These short-term shakeouts are going to happen far less often than we've seen over the last few years."

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