Forget stocks, gold is back!

This week's sharp rise in commodities was a surprise to some. CNN's Jim Boulden reports.

Gold leap for dawns many buildings in the city of London some within the shelter of the bank of England. And while the BOE in its fellow central banks has attempted to stabilize the financial market this week. Many eyes turn back to the precious metals like gold. There’s no a total loss of faith and trust in the system. And when people do, when people lose faith like that, they move toward a hard tangible lasses like gold.

On Wednesday gold future saw the biggest one-day jump in history, up 70 dollars. A week is a long time in politics and as we have seen also in the markets. Gold briefly topped 1000 dollars an ounce back in March, but was down 27% from that high this time last week, while oil was down a nearly third from its super spike in July, but all that changed with the bankruptcy of Leman Brothers.

Unlike holding shares or bonds or even a bank account, holding a physical commodity means you don’t have to rely on the financial health or the so called counter party, such as a bank or a company or a government. A big reason people turned commodities as safe haven, commodities also benefit this week from the dollar’s weakness, meaning investors could get more dollars and hand more commodities for their money. When the dollar is weak, you tend to find a lot of investments like moving into commodities, because a lot of commodities are denominating US dollars anyway. So as a result, they become cheaper to consume, and more expensive to produce which tends to be poorish for commodities. And secondly, dollars, er, commodities are used as hedge against the declining dollar.

So who can take advantage of this, well, you unlikely to stick a few barrels of oil in the basement, gold is another story. Ten ounces gold to fit the pummel hunt could store at home a few ounces. Stores count for very low insurance //.

Of course, there were plenty of voices this past summer that warned commodities with then in bubble territory, and it looked like that might be true until this week. Now there are vows calling for gold push over a thousand dollars an ounce once more. And this time stay there as long as financial markets look a bad debt.

Jim Boulden, CNN, London.