Sell in May and go away; come back on St Leger day. This old stock market saw will still be haunting bulls of commodities following the unruly rout in the sector in the first week of May.

Even gold was hit by the general sell-off. But the big story was in silver, which investors had chased up from $37 (£22) on 1 April to just under $50 by the end of the month. Then it plummeted to $33 in one gut-wrenching week for all commodities. 

Two questions arise from this. First, just how far does speculative interest in commodities drive prices? Second, what are the ramifications for shares, and specifically the commodities-rich FTSE 100 index?

Most investors would concur with John Ventre, portfolio manager at Skandia Investment Group: ‘By their nature, commodity markets are quite speculative and it’s clear from the market action that we saw that too many participants had the same positions – a classic case of a “crowded trade”.’ He adds: ‘The fundamental rationale for higher commodity prices still exists. In the medium term, emerging market demand isn’t going away. Meanwhile, commodity supply is far from unlimited.’

Gold’s rise to $1,550 has been less about speculation and more about inflationary concerns and currency debasement. I believe the only way is up for gold, mainly because monetary authorities (particularly in the UK) are clearly attempting to inflate their way out of the debt trap by keeping interest rates artificially low, and the newly monied classes in emerging markets view gold as a store of value in their own inflation-hit economies. 

Over the past decade, physical commodities and related stock market sectors such as mining and oil & gas have recorded strong gains, particularly since the March 2009 nadir. For believers in the concept of the commodities super-cycle, the recent rout presents a buying opportunity. One of the best ways to get in is through BlackRock World Mining Investment Trust. In the week immediately after the commodities sell-off, this £1.4 billion trust was quoted at a 13 per cent discount to its net asset value. The trust, one of the industry’s best long-term performers, clearly has a strong following, but not as strong as its open-ended equivalent, BlackRock Gold & General, despite the investment trust’s generally superior performance.

Some of its portfolio is invested directly in bullion, but a third is invested in London-listed mining securities such as Rio Tinto and BHP Billiton. It also has a stake in commodities trader Glencore.

Which brings me to the second point. Most of us know that the FTSE 100 is not a UK-centric index. Indeed, mining and oil companies account for more than a third of its value. Glencore’s London listing will lift that weighting, while planned listings later in the year could see resources account for up to 40 per cent of the index.

These shares are far more volatile than the wider market: their fortunes reflect not only underlying commodities but also what’s happening in the US and China. So the dollar, in which commodities are quoted, and where an even larger proportion of shares in the index derive their underlying earnings, also has an overbearing influence on the Footsie’s performance.

For fans of the supercycle and emerging markets, the Footsie is a less volatile and more diverse play than investing in physical commodities. The flipside is that the  Footsie is overexposed. It is also highly concentrated: 15 companies now account for half its market capitalisation. Risk-averse investors, particularly UK investors who have close to £20 billion invested in FTSE 100 tracker funds, believe they are reducing risk through index diversification. Clearly they are not.