Speculative buying in the commodities pits is hitting fever-pitch status, with investors pouring money into virtually every commodity out there. In fact, commodity prices have been booming ever since Federal Reserve Chairman Ben Bernanke gave his now-famous Jackson Hole speech back on Aug. 27. That’s the speech in which Mr. Bernanke signaled the market that quantitative easing part II, or QE2, was just around the corner.

Well, the central bank chief made good on his QE2 signal last week, agreeing to buy some $600 billion in longer-term Treasuries at a clip of $75 billion a month for the next eight months. The immediate reaction of investors was to keep on doing what they had been doing since the Jackson Hole speech, and that’s buying up both stocks and commodities.

To give you an idea of just how big the buying has been in stocks since late August, all you have to do is to calculate the percentage gain on the S&P 500 Index of that time period. The benchmark U.S. index is up nearly 14% since Jackson Hole. Most major commodities are up even more since late August, with the Deutsche Bank Liquid Commodity Index -- a broad measure of agricultural commodities like coffee, sugar, cocoa, etc. -- climbing more than 18% since then.

Precious metals also are up sharply, with gold up more than 12%. But the real precious metal taking off like a silver rocket ship is, well, silver. The precious metal has been the darling of precious metals investors since QE2 became evident. In fact, the iShares Silver Trust (SLV) is up 40% since Jackson Hole.

Now, there was record-high trading volume on SLV in Tuesday’s trading, and we saw the price of silver gyrate wildly late that afternoon. While this price swing was due to new changes in cash requirements instituted by the Chicago Mercantile Exchange for trading silver futures, it still shows how much action is taking place right now in precious metals.

So, why is there such renewed interest in commodities and precious metals? That’s simple; the Fed’s QE2 is going to put pressure on the value of the U.S. dollar. And a weaker dollar is inflationary. The inevitable result is higher inflation, and that inflation will take place first in the price of commodities. Investors now simply are reacting to the economic truths that Mr. Bernanke and company are trying to orchestrate into reality.