Below is a chart over the past ten years of Corn priced in terms of Gold. (Rolling front Corn contract divided by spot gold). The chart shows the past ten years of history, but I looked at a longer series as well, and in terms of gold, this is the cheapest that corn has been in the past 50 years (which is as far back as I looked).
Of course, there are obvious reasons for recent weakness in Corn, including last week’s crop report and improved rains in the forecast. And there are international events which are driving safe have demand for gold, including the Brexit vote and consistent weakening of the Chinese currency.
But take a step back and think about this chart. The cheapest in FIFTY years. Gold is nowhere near the high set in 2011. You can’t eat gold. Gold though, is a form of currency. Some say it’s the only true currency. When Fed officials bemoan the lack of productivity in the economy, they sure don’t seem to be talking about corn. Isn’t that the definition? We produce more units at less and less cost.
I don’t have a specific recommendation here. I would just note that it’s solid strategy to buy what is cheap and sell what is expensive.
Alex Manzara
