• There has recently been some chatter about the correlation between gold, a global safe-haven market, and wheat, the cockroach of the global grains sector. 

• Given the ongoing certain uncertainty that has taken over the world, gold remains fundamentally bullish, even at  or near all-time high prices. 

• On the other hand, the key reads or real fundamentals make winter wheat markets some of the most bearish in the entire commodity complex. 

As I've talked about in the past, US winter wheat markets are two of, if not the most fundamentally bearish markets in the entire commodity complex, based on our reads of REAL supply and demand as opposed to the latest round of USDA's imaginary estimates. As a reminder, these key reads are: 

• National Cash Indexes (CSWI) ($CRWI) and the Law of Supply and Demand
  • Last Friday’s calculations put SRW available stocks-to-use at 47.1%, what would be the largest end of May (and end of marketing year) figure since 2017’s 51.8%, and HRW available stocks-to-use at 46.8%, what would be the largest end of May figure since 2020’s 47.0%.
• National average basis
  • Both markets are weaker than their respective previous 5-year low weekly closes despite July futures contracts being priced in the lower 20% (HRW) and 10% (SRW) of their price distribution ranges (based on weekly closes back through 2020).
• New-crop futures spreads
  • Both sets of spreads can still be viewed as bearish. Recall the HRW set was running between 90% and 100% calculated full commercial carry during April, prompting an increase in the official storage rate staring Monday, May 19. 

And it's these reads that make this piece so much fun to write and talk about. Just over a week ago (Tuesday, May 6) I saw an “interesting” - I've edited myself with the use of that word - post on the social media site now known as X (formerly Twitter). The poster said, and I quote, “Wheat and gold are historically tied to the hip. The last time I could find a major divergence in price, wheat reluctantly followed. Notice the divergence now.” (And he attached a chart.) 

Once I regained my composure, I sent the post to my son Ben. Ben is the brains behind our operation, taking care of the IT (information technology) along with writing our trade algorithms and handling the company’s long-term investments in a number of market sectors. Anyway, when he saw what I had shared with him he quickly ran his correlation programs and responded to me with a couple charts - The apple doesn’t fall far from the tree, does it? – and a statement a won't repeat here. Both charts showed as close to zero correlation as there can possibly be between two markets, short-term, intermediate-term, long-term, it didn't matter.There was not a positive correlation (e.g. HRW and SRW wheat) or a negative correlation (e.g. US dollar index and gold). There was nothing. 

Which is what we would expect. Gold (GCY00) is a hedge against inflation and a safe-haven market when certain uncertainty takes over the world. Wheat is the cockroach of global grain markets, a crop that can be grown anywhere – literally^[i] – and seemingly survive any number of catastrophes (weather, war, etc.). I’ve tried to think of a connection, and all I can come up with are a variety of stories from King Solomon's time mentioning the two commodities. But usually not together. 

By the end of this month combines will be running across fields in the far US Southern Plains, starting the harvest of the 2025 winter wheat crop(s). Seasonally, this tends to put more pressure on winter wheat markets. Will this put a top in the gold market as well? If you answer “yes”, then I’ve got some mountain top property in southwest Kansas. From the porch clouds are at your feet. And if you’ll buy that I’ll throw the Kerry Bridge in free^[ii].
 

^[i] I’m reminded of Saudi Arabia’s national wheat production program. Yes, that Saudi Arabia. The one in the middle of a desert and sitting on top of what is reportedly the world’s second largest oil reserves. The first being Venezuela. 

^[ii] Borrowed from George Strait’s song “Ocean Front Property”.