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How gold predicts the palm oil price will triple
June 22nd, 2020
⏰ 1 minute read
⏰ 1 minute read
Gold & palm oil are historical twins
Gold
Gold is back in the news, the price has risen sharply to $1,770, is heading to a new all time high & looks very likely to reach $2,000 soon. But did you know that historically the price of gold & palm oil are very similar & move in the same direction? This means the price of palm oil will triple.
History
Back in 1980 when central banks were just starting to crack down on money supply gold was just under $600 & palm oil was just over $600. The 2 then declined together to lows in mid 1999, gold below $300, palm oil close to $300. A decade later by 2012 they had both jumped, gold to $1,600, palm to $1,200.
Raw materials out perform
While gold is per once & palm oil per ton, they are both raw materials which need to be mined & grown. Both take time & large investments to create & prices depend on the balance of supply & demand . Gold has now increased 7x from the low compared to 3x for the Dow. Raw materials are out performing.
Diverge
But in the last 10 years as money growth was tightened again & economies stopped growing they both declined, gold back to $1,000, palm oil by more, to $500. Why the bigger gap? It seems to me it’s simply because gold supply already stopped growing since 2013, while palm oil continued to expand. But palm oil will now stop too.
Catch up
Palm oil plantations stopped new plantings around 2015. As it takes 4 years to mature, that zero growth will start to impact from now. Plus there will also be older trees now becoming less productive. This combination could mean supply shrinks like Gold. Money growth has started again, gold is surging & palm oil should catch up which means triple.
Gold is back in the news, the price has risen sharply to $1,770, is heading to a new all time high & looks very likely to reach $2,000 soon. But did you know that historically the price of gold & palm oil are very similar & move in the same direction? This means the price of palm oil will triple.
History
Back in 1980 when central banks were just starting to crack down on money supply gold was just under $600 & palm oil was just over $600. The 2 then declined together to lows in mid 1999, gold below $300, palm oil close to $300. A decade later by 2012 they had both jumped, gold to $1,600, palm to $1,200.
Raw materials out perform
While gold is per once & palm oil per ton, they are both raw materials which need to be mined & grown. Both take time & large investments to create & prices depend on the balance of supply & demand . Gold has now increased 7x from the low compared to 3x for the Dow. Raw materials are out performing.
Diverge
But in the last 10 years as money growth was tightened again & economies stopped growing they both declined, gold back to $1,000, palm oil by more, to $500. Why the bigger gap? It seems to me it’s simply because gold supply already stopped growing since 2013, while palm oil continued to expand. But palm oil will now stop too.
Catch up
Palm oil plantations stopped new plantings around 2015. As it takes 4 years to mature, that zero growth will start to impact from now. Plus there will also be older trees now becoming less productive. This combination could mean supply shrinks like Gold. Money growth has started again, gold is surging & palm oil should catch up which means triple.
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