Commodities Comeuppance?

What the wise man does at the beginning, the fool does in the end.
-- Warren Buffett, at Berkshire Hathaway's annual meeting in Omaha, Neb., May 6, 2006.

Gold, silver and copper have made enormous moves this year, rising almost daily as booming global growth has outstripped production and left speculators sitting on huge gains. Now, after two days of heavy selling, could the smart money be leaving the building?

Gold has gained close to $200, or 40%, since the start of the year, and last week traded above $700 an ounce for the first time since 1980. Over the past five months alone, silver has rallied 65% to trade near a 25-year high of $15 an ounce, while copper more than doubled to an all-time high above $4 a pound.

For the first time, those gains seem threatened. Since peaking last week, gold is down 6.4%, silver down 10.8% and copper down 7.4%, sparking fears that a bubble is deflating. Is it? To answer that question, you must first determine the degree to which fundamentals have driven the current rally. ...