Ethanol is a Fraud But Gold Rallies

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The price of corn per bushel has doubled in the past year, which is great for grain farmers – but not-so-good for livestock producers that count on cheap, corn-based feed for their cattle, hogs and poultry.

AFP reports that “registered Angus breeder Jim Skinner said soaring grain and fuel prices have led to a 40 percent rise in expenses.”

And we all know the main cause of the inflated price of corn – everyone say it together now – ethanol. That’s right.

“Ranching consultant Bob Loucks has added his voice to the chorus of critics claiming the government is unfairly underwriting ethanol at the expense of animal producers, in essence pitting one agricultural sector against another,” the AFP continues.

“Ethanol sucks,” Kevin Kerr put bluntly. “Corn is overbought on the weekly and daily price charts and there is a decent size gap below the market, close to the 50% correction level.”

Many factors are working together that could dampen the over-enthusiasm that traders have been showing corn, including a lower crude price, an oversold U.S. dollar, and harvest pressure.

And the AP reports that ethanol stocks fell yesterday across the board, with several reaching 52-week lows. “A glut of product, limited blending capability and high corn prices continue to overshadow recent enthusiasm about the industry.”

Clearly, some people are catching on to the fraud that is ethanol… but that’s not going to stop the government from dumping money into the industry. They’ve already thrown billions of dollars of taxpayer money at ethanol – so even if you’ve known all along what a fraud ethanol is, you’re still ‘invested’ in it.

Here’s a commodity that is far from a fraud: Gold.

“Gold is as jumpy as a kernel of corn in a hot greased skillet this week,” says Addison at The 5 Min. Forecast . “Traders popped the metal as high as $736 on Monday. Then it simmered down to $722 yesterday. As we write, it’s back up to $732. 

“But here’s an important observation from Adrian Ash at bullionvault.com: ‘The gold market has stayed above $700 for 13 consecutive days. The spike of May 2006 managed just four sessions above that level. The all-time top of Jan. 1980 only saw five days running when gold prices topped $700 per ounce.’

“This rally has a much more solid base to it than ever in gold’s history.”

Kate Incontrera
for The Daily Reckoning Australia

Kate Incontrera
Kate Incontrera is the managing editor of The Daily Reckoning. She is also the author of The Daily Reckoning's Weekend Edition, a weekly wrap-up of contrarian investment analysis.
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