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When central banks in a country or region lower their target interest rates, the respective currencies tend to fall in the near-term. And with the globally coordinated (and non-coordinated) rate cuts happening worldwide, conventional wisdom suggests that all currencies would give way to precious metals.

Indeed, we've seen a fair amount of precious metal buying in the ETF world. Although gold via streetTracks Gold Shares (NYSEARCA:GLD) is still 20% off its high, it is essentially flat on the year. Similarly, the Powershares DB Precious Metals Fund (NYSEARCA:DBP) is down a mere 10% YTD.

Broader commodity indexes haven't been quite as lucky. The PowerShares Commodity Index Tracking Fund (NYSEARCA:DBC) and the Dow Jones AIG Commodity Index ETN (NYSEARCA:DJP) are down 32% and 39% respectively.

The reason for the commodity bust has some roots in the current pressures of deflation. Some people believe that the unprecedented efforts to increase liquidity and consumer spending around the world will ultimately create hyperinflation in an artificial economic rebound. And if that's the case, DBC and DJP should rise precipitously.

However, when oil and "ag" were setting inflation-adjusted records, gold and silver were 50% below the inflation-adjusted highs of the 1980s. Wasn't that akin to hyperinflation... watching oil vault from $75 to $150 in less than one year? Perhaps precious metals are not the answer to hyperinflation. (Or perhaps other "stuff" is!)

It stands to reason that gold and silver, conventional safe havens for inflationary times, seem to be working their best magic here in deflationary times. That seems strangely contrarian.

Looked at another way, however, the deflationary data that we're receiving today may be a lagging indicator. After all, assuming we get our GDP growth both here and abroad, some inflation would inevitably be around the corner. So it may be that investors are simply purchasing precious metals ahead of what's coming down the gold brick road. (Only this time, the rise in commodities will be happening when faith in fiat currencies is faltering.)

Regardless of the reason for price movement, it is indeed worth noting that the Powershares DB Precious Metals Fund (DBP) is up 8.5% over the last 8 weeks. Equally noteworthy, this fund is 5% above its 50-day moving average.

Precious metal etf dbp

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Source: Precious Metals ETFs: Should You Follow Conventional or Contrarian Wisdom?