What is good for the corn market is good for gold

I came across an interesting article buried in this morning’s weekend edition of the Wall Street Journal that I thought I would pass along. It had to do with an announcement that China had just completed the sixth largest single purchase of corn from American farmers in history — 1.44 million tonnes. Corn Friday jumped 4.6% on the news to $6.53 a bushel on the Chicago Board of Trade. According to the article, the U.S. Department of Agriculture reports recent sales of 2.84 million metric tonnes of corn to China, or “unknown buyers.” The CRB, a general index of commodities, was up over 2% on the week.

Over the past several months, gold’s rangebound behavior has been blamed, among other things, on an economic slowdown in China which would in turn affect its appetite for commodities. This corn purchase is one of the first signs that China’s loss of appetite for commodities might have been overstated. It could be too why gold suddenly decided to go higher last week even though the news from the Federal Reserve was not overly gold friendly.

In this case, what is good for the corn market might very well be good for the gold market.

MK

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