What’s The Better Investment, Food Or Gold?

| October 8, 2012 | 0 Comments

agriculture commoditiesIt’s easy to find reasons to buy gold.  After all, just about every pundit on TV or in print can give you a list of reasons why investing in gold is good.

Of course, we all know by now that gold is one of the most important safe-haven investments.  It’s a good hedge against inflation, deflation, political and economic instability, NFL replacement refs, and, well, you get the picture.

However, gold is expensive.  Plus, the yellow metal trades more like a currency than a commodity.  Factors like supply and inventories don’t generally impact the price of gold like other commodities.

As such, it can make the price more difficult to predict than what you realize.

On the other hand, the fundamentals behind food and other agricultural products are about as cut and dry as you get.

Just think about this summer.  There was a historically bad drought in the Midwest.  It had a severe impact on crop yields.  And, the longer the region went without rain, the lower the yield expectations became.

Of course, during this period, grains prices soared.  It makes sense – we’re talking about a significant drop in supplies.

On the demand side, the fundamentals are equally as predictive.  For example, as developing countries gain wealth, more of the population demands higher protein foods.  That means products like meat get consumed more.

As such, a positive economic growth report in a developing nation could spur higher prices on the global livestock market.

Okay, so food may be more predictable than gold, but does it make a better investment?

Look, there’s nothing wrong with having gold in your portfolio.  There’s a reason it’s so popular.  However, over time, you may just get more bang for your buck investing in food.

Here’s the thing…

The world’s population keeps growing.  Plus, advances in health and medicine allow people to live longer.  Eventually, population growth may stabilize – but that doesn’t seem to be in the cards anytime soon.

So, demand for food is going to skyrocket.  Not to mention, there are already millions of starving people in the world.  In other words, growing food demand should be a fact for quite some time.

Meanwhile, there’s only so much land available for farming and ranching.

And you know what that means…

Higher food prices.

Over time, prices on grains, meats, dairy, and other essential food groups will likely continue to rise… possibly even more so than the price of gold.

Fortunately, there are some good, cheap ways to invest in food price inflation using small caps and penny stocks.  Food companies, agricultural equipment businesses, fertilizer companies, and more can all be found for reasonable prices.  Just don’t expect them to stay cheap for the long-term.

Yours in profit,

Gordon Lewis

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Category: Commodity Stocks

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