Street Finds Itself "Paved" With Gold Right Now

Traders are blinking in disbelief at the commodity complex, as the S&P Energy Index (a basket of all the major energy stocks) has hit an historic high and gold stocks have gone parabolic. Look at what gold stocks have done in just the past two days:

Barrick Gold +17%
Yamana Gold +15%
Gold Fields +14%
Harmony Gold +13%
Newmont Mining +12%

The traditional problem with gold stocks is that they are thinly traded--indeed, Barrick and Newmont have traditionally been the big kahunas in this space. But what kahunas they have become: Barrick, with a market capitalization of $48 billion, is now a bigger company by market cap than Honeywell ($45 billion), Caterpillar ($45 billion), Home Depot ($44 billion) and Merrill Lynch ($43 billion).

What's up with gold hitting historic highs? Most traders point to falling supply and rising demand, particularly in Asian markets. Inflation is also bringing in some buyers.

And don't just say it's because the dollar is weak. Because gold is dollar denominated, a weak dollar has traditionally made it cheaper for buyers of gold in other currencies; that's true, but gold held up even when the dollar was strong in November and part of December.

But not everyone is bullish on commodities. David Rosenberg at Merrill put out a note this morning, arguing that commodities were topping out. He cited:

--Yesterday's weak ISM figures, traditionally bearish for commodities;
--The Baltic Dry Index (a measure of global shipping rates) is 20 percent below the highs it hit in November;
--Finally, he notes that the commodity rally is at odds with the perception that global growth is moderating.

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