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J.D. Steinhilber, founder of ETF newsletter and investment management firm Agile Investing, comments on gold and commodities:

Commodities had their best month of the year in August, as the Dow Jones-AIG Commodities Index rose 7.2%, led by gains of 10-40% in the prices of crude, unleaded gasoline, natural gas, and heating oil. Energy prices, which were firm throughout the month, spiked at month-end on damage from Katrina to the energy production and distribution infrastructure in the Gulf Region. In September, while energy continues to garner the commodity headlines, as prices have fallen back to pre-Katrina levels, gold has quietly rallied $30 to $460, its highest level in 17 years.

Since gold is first and foremost a hedge against monetary inflation, its recent rally can be directly traced to two inflationary developments: i) the perception that the Federal Reserve will adopt an easier monetary policy [which seems to have been disproved from the interest rate increase this week], and ii) the prospect of massive (e.g. $150 billion or more), deficit-financed government spending on reconstruction.

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Source: Understanding the Strength in Gold and Commodities (ETFs: GLD, IAU)