To understand this market, we also need to understand behavior of hot money. This money is running around, sometimes radically changing markets. The usual source of hot money are hedge funds. But something happened lately. There was, and sometimes still is, a lot of money in funds which should be managed much more conservatively than hedge funds, but which were really managed the same way as hedge funds.
The biggest hot money effects happened in the end of 2007 and first half of 2008. Commodity bubbles were not completely synchronous: when most of commodities peaked in the end of 2007, oil peaked in July of 2008. There were more hot money sources then. Among those: pension fund of state of California, multiple endowment funds and a lot of sovereign wealth funds. When pension and endowment funds justly deserved what happened to them (and I don't understand why there is no investigation in California), sovereign wealth funds deserve special attention. Many of them were from OPEC countries. OPEC has a very strict provision: member countries either have to nationalize oil production or at least to nationalize oil export. We had a typical wash sale situation: different companies owned by the same government sold oil and bought oil futures. I don't know if it was a wash sale technically, by CFTC definition. If not, CFTC should make regulation changes. As far as I know, CFTC resisted any changes and Congress investigation didn't do much good. Bill Energy Markets Emergency Act of 2008 was blocked in the Senate. Even that bill was mostly toothless and failed to mention wash sales by OPEC countries.
Of course, market eventually crashed bubbles. No bubble can continue forever. Most endowment funds and pension funds left the area. I hope management was replaced. It was replaced at Harvard Endowment fund, although, judging by current holdings, new management isn't much better.
Next target of hot money was gold. I think "was" would be the right tense, although I'm not sure that gold bubble is over. But picture is pretty much the same: if in the end of 2007 multiple TV personas, TV, newspaper and internet ads flooded us with possibilities to earn immense fortunes buying commodities and commodity companies, now even more ads calls you to buy gold. Never mind that India, traditional buyer of 30% of gold for many years, walked out of gold market in February. Never mind that, according to some accounts, in the last couple of months US population is selling more gold jewelry as scrap than buying new gold jewelry. Gold is peddled as defense against inflation, which is nowhere in sight. But gold market is showing signs of exhaustion.
What is the next hot money target? That's a trillion dollar question. If guessed right, you can front run hot money and make a lot for yourself. Probable candidates:
Oil market (again): interesting picture, in the last couple of weeks, price goes up only during NYMEX floor trading hours, which might be a sign that ETFs and other funds are involved.
Stock market: current bear market rally might be a sign, but I'm not sure.
Commodities other than gold: there are some signs of warming up there.
Unfortunately, when you see a lot of TV ads, it's too late. It might be a sign of a bubble exhaustion. The problem with any bubble, you can't short it until it pops.
Full disclosure: at the time of publication author had no positions in commodities or commodity related stocks. Positions can change any time.