Goldman Long Agriculture: Parabolic Agricultural Sector Could Aid Precious Metals Bull Market
Setting the grounds for a rigorous commodities rise, that would presumably bring along gold and silver, Goldman Sachs has indicated that it is “very positive globally” on agriculture. The bank cites dry weather as a reason for the rise, especially in grains, but makes no indication that environmental toxins have played a role in the depleted crops experienced globally.
As can be seen below, silver and wheat have performed similarly over the course of multiple years. Granted, wheat has given rise to a more volatile-looking chart aong the way, nonetheless the price movement in both sectors – naturally, as we really talking about the US Dollar pegged to these two goods – have both remained in a general uptrend. Whereas wheat in 2007 sat around $200 per metric ton, silver was under $15 per troy ounce. Derived from this past behavior, it is reasonable to presume that, as short and medium economic patterns repeat themselves, the prices will continue to trade in step with one another.
“In the main grain markets in the agriculture sector, they’ve all become a lot more closely connected,” Steve Jesse, executive director of fixed income, commodities and currencies at Goldman Sachs, said today on a panel at an agriculture conference in London. “What’s happening right now in the U.S. with the drought is the main driver of the U.K. wheat market in the last few days.”
As can be seen over time, commercial hedgers have become increasingly long in wheat. The same is true in silver. That this pattern has unfolded over the long term, it makes sense to surmise that it hints at future trends. In the case of wheat and silver, the future trends remain the same as a decade ago, tending towards differing rates of price inflation in this agricultural good and precious metal.