“Notably, Wheat prices have basically taken a pounding in 2014, with WEAT down >20% year to date, in spite of a huge bounce in the short term throughout the month of October until this point. Briefly trading above $12 Friday morning, WEAT has regressed rather sharply off of these recent highs and seems to be seeing some static around its 50 day MA ($11.73),” according to a note published by Street One Financial Monday.
Since the start of the fourth quarter, CORN has added $9.6 million in new assets while SOYB has seen modest inflows, but GLD has bled $959.1 million over the same period.
“At 377 bu/oz the gold/corn ratio is approximately 128% above its nearly four decade average of 165 bu/oz. Hypothetically, if an investor sold gold and purchased corn at the current 377 bu/oz level, and the ratio subsequently retraced by 50% to a level of approximately 189 bu/oz, the investor would then be able to sell the corn and buy back twice as much gold, essentially doubling their initial investment. Moreover, the assumption of a significant 50% reversion to 189 bu/oz levels would still leave the gold/corn ratio almost 14% above the historic mean of 165 bu/oz,” according to Teucrium.
Gold/Corn Ratio
Chart Courtesy: Teucrium
Tom Lydon’s clients own shares of GLD.