It might seem like sugar and gold operate as two mutually exclusive commodities that don’t have any correlation with one another. However, one market strategist has identified a pattern in the current environment that links the two when juxtaposed.
Both gold and sugar have been rising as of late, especially the precious metal with its gain of over 30% this year. Sugar prices on the other hand have been trending lower, but picking up again in the midst of the holiday season where demand is higher for sugary treats. It could just be auspicious timing where it’s more of a cause of causation versus correlation. But per a Kitco News article, a market strategist can see a connection between the two.
Right now, sugar is one of the bright spots in the agricultural commodities group. Its bullish run could keep food prices on the high end and thus, buoy inflation. This devaluing of the dollar can in turn support demand for gold. Right now, that’s exactly what’s happening as gold purchases continue.
“If yields are up because the economy is so great, why does gold continue to be bought?” asked Michele Schneider, chief strategist at Marketgauge. “Are you going to believe U.S. Treasuries or gold? Personally, I’m going to believe in gold. If commodities like sugar continue to rise, we’re nowhere near done with inflation. I think we’re seeing just a short-term pause in inflation before it picks up again.”
Rising Sugar Prices in 2025?
Schneider also noted that geopolitical risks could hurt the global food supply. In turn, this could add a spike in prices and thus, keep inflation elevated. Of course, this will make the Federal Reserve’s task that much more difficult as it tries to ease monetary policy and guide the economy into a proverbial “soft landing.”
Schneider also mentioned that the forces of climate change are also a tailwind for increasing sugar prices. Add this to the uncertainty with geopolitical risk and sugar prices as well as food prices in general that could increase in 2025.
If that’s the case, investors can take a look at the Teucrium Sugar ETF (CANE). The fund can offer portfolio diversification with exposure to agricultural commodities like sugar, primarily via futures contracts.
Major sugar suppliers such as Brazil have already seen hits to supply due to inclement weather patterns this year. If this continues, sugar could continue its uptrend.
For more news, information, and analysis, visit the Commodities Channel.