There is a timely connection between gold price and agricultural products.
Higher grain prices and ultimately higher food prices are historically positive for gold, analysts at HSBC said in a recent note to clients.
Some of that relationship is playing up again as large swaths of the United States, South America, the former Soviet republics and India have been declared disaster zones due a drought. In other parts of the world, such as the Philippines and China, floods can cause as much damage as drought to agriculture products.
Gold has been trading in a tight range recently. On Wednesday inched up 0.2% to settle at $1,616 an ounce on the Comex division of the New York Mercantile Exchange. On Thursday, gold futures edged higher as investors weighed a fresh batch of Chinese economic data that opened the door for further monetary-policy easing in the world’s No. 2 economy.
Gold futures ended higher Thursday. Gold for December delivery advanced $4.20, or 0.3%, to settle at $1,620.20 an ounce on the New York Mercantile Exchange. That was the highest settlement for the December contract in a little over a week and a second straight move higher for the yellow metal.
Continued expectations for more stimulus in the U.S. encourage traders to become more active. If the Federal Reserve in the U.S. introduces more quantitative easing, the case for gold as an alternative to currencies debased as a result of such moves gets stronger.
The UN Food and Agriculture Office tracks prices of food around the world, converts local prices to US Dollars. Prices for corn, cereals, oils/fats, dairy and sugar make up the components of the index, which is updated monthly.
