On Tuesday, the Reuters/Jefferies CRB commodity index had its best day in history. “Nearly all commodities enjoyed a goosing yesterday,” according to Addison Wiggan and Ian Mathias in the 5 Min. Forecast.

However, Eric Roseman says, “Until the deflation ceases, commodities will remain vulnerable. Never in the history of capitalism have commodity prices rallied during a severe contraction in bank credit.”

Nevertheless, he predicts that inflation is still hard-wired into the global economy. That’s why he’s buying distressed oil companies and oil equipments stocks alongside the best-positioned global insiders. 

Mining is an expensive business. So if commodities prices fall sharply many mines are forced to close rather than operate at a loss. When this happens supply tightens and prices begin to recover. Chris Mayer says there are signs this is happening now… and a rally in mining stocks is on its way.

Today, despite mixed signals from OPEC on a reduction in its oil output crude oil prices are nearing $100 a barrel. This is not the kind of news commodities bulls want to hear.

However, Matt Badiali in The Growth Stock Wire says lower crude oil prices should be good news for fuel refiners. When oil prices were in the stratosphere this summer, refiners lost out because demand for gas dropped hard.

Matt says refiners’ stock is rising and should continue to do so, as long as we don’t see another spike in crude prices…

Crude oil prices are down over 25% from their peak this year. Gold prices have fallen over 20%. By standard definitions, that’s bear market territory.

Eric Roseman says the ’70s are evidence that commodities can decline sharply in a secular bull market. But the US needs to print money like crazy to support its spending. Eventually, this will relegate the dollar to the dustbin and send commodities soaring again.

Eric says investors should take advantage of the dip in prices to buy stocks in offshore oil drillers, major oil produces and gold miners.

Lee Lowell at The Smart Profits Report says commodities are continuing their late summer swoon. Crude oil, natural gas, gold and silver have all taken heavy losses since mid-July, when the dollar began to rally. But like a lot of the contrarian investment experts we have published here on Contrarian Profits Lee says these commodities are oversold right now. A sharp rebound could be just around the corner…

1-2-3 Trader editor Jim Stanton says commodity ETFs are riding the three-point waves of a downturn. After the first trough, the stock stages a small rally, before heading back down. This pattern provides good buy and sell signals for resource investors. Jim says ETFs United States Oil Fund (AMEX: USO) and United States Natural Gas Fund (AMEX: UNG) have further short-term corrections ahead, meaning an opportunity to go short.

It’s a difficult time for commodities bulls. Crude oil is off more than 20% from its July peak. Gold is going for about $830 an ounce, way off its Spring highs. And the Reuters/Jefferies CRB Index is down 19% from its June high.

Energy expert Byron King says investors shouldn’t panic over the drop in prices. For a start, August is a notoriously poor month for commodities. It tends to be a month of net selling.

Despite some demand issues caused by the global slowdown, Byron says commodities are in a short-term correction. And that means plenty of great bargains on offer…

There’s plenty of bullish sentiment around commodities here at Contrarian Profits.

Byron King says gold and oil prices are experiencing a correction, not a trend reversal, and that the long-term prospects for these commodities are bullish.

Euro Pacific Capital president Peter Schiff goes even further. He reckons the outlook for gold and oil has never been brighter. That’s because the current dip in commodity prices – and the dollar rally – is a market ‘fake’ that Wall Street has bought into without a rationale. The fundamentals simply don’t support it…

Sugar could be the next commodity to soar in price, says Profit Hunter’s Manraaj Singh.

The price of sugar has risen 37% in the last year, and this was with a huge surplus. Next year, droughts in India and rains in Brazil — the world’s two biggest sugar producers — could create a shortage in the market.

Manraaj says these supply shocks have not yet been priced into the market, meaning sugar could be at the start of a huge rally…

We’ve heard from Russell McDougal that resource stocks are a bargain for investors right now. But The Daily Reckoning’s Dan Denning says there could be more pain for resource investors in the short term. Commodities are getting caught up in the bear market, and technical analyst Gabirel Andre says the correction has further to go. More from Dan…