The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( Insider Monkey) -- Gold stocks are quite popular among hedge funds these days, and for good reason. John Paulson, who is very bullish about the precious metal, made $5 billion by betting on gold in 2010.
Overall, the price of gold has been on an uphill trend over the past decade, but it grew much more rapidly than other commodities only in recent years. Gold supply is pretty inelastic, which makes it a good long-term play on inflation. This may be one of the reasons why investors preferred gold over other commodities. Our calculations showed that gold is overpriced relative to other commodities. Considering that there were no supply side shocks after September 2008 that would explain the 100% increase in gold prices relative to commodities, we think investors would be better off by betting on commodities and shorting gold.