Gartman: Grains Still Strong, Gold Not So Much

Jeff Cox, |Special to

Even as commodities swell to new highs every day, there's still plenty of room for them to go up, according to analysts who say the price spikes aren't just the result of daring speculators.

Agricultural commodities, primarily wheat, corn and soybeans, are still considered a pretty solid investment, while precious metals like gold, silver and platinum also are expected to continue to see substantial price gains.

The moves up are attributed to various factors, including demand from emerging markets and the need for corn to make ethanol.

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"All things being equal, China is still the underlying instrument," Dennis Gartman, editor of the Gartman Letter, said on "Squawk Box."

"Throw on top of that the problems of ethanol, then you've got a perfect storm."

Moreover, he doubted that the engine driving the surge in grains is completely based on speculation. He said that unlike metals, there are no major exchange-traded funds that have flooded the grains market and made them less desirable investments.

He marveled at some of the commodity moves. Corn has moved from $2 a bushel a year ago to nearly $5.70 a bushel. Spring wheat has surged from $3.50 to about $25.00, while hard,red winter wheat has moved from $3.50 to $12.50.

"You've had moves that you've never seen before and likely never will see again," Gartman said.

Those moves are likely to continue as countries around the world continue to grow and demand US products to make their goods.

"I just think what's happening overall is because of the growing emerging nations of the world, who are now demanding refrigerators and TVs and cars -- the good life," said Greg McCoach, president of the Mining Speculator newsletter. "We're in a commodities cycle that's going to last for a decade or more."

McCoach sees no end in sight for the rise in gold and other metals. As the dollar continues to fall, the credit crunch continues and demand for hedge moves like gold increases, the prices of the metals could move to stratospheric heights.

"I maintain that the best way to protect yourself is to put 5 to 10 percent of your liquid net worth and take physical gold," McCoach said. "I think there's going to be a lot of paper promises that just disintegrate. Stock markets are going to be trending lower, not higher. Owning physical metals represents insurance against that."

Commodity Crazy

Gartman is taking a more cautious approach towards gold . Gartman is long now on gold, meaning he still thinks it will increase in price past its current level of more than $1,000 an ounce, while being short on the stock market, which he thinks has more room to move to the downside. Yet he cautions against buying more gold in this market.

"The problem that gold will have is that it's been the place everyone has gone to and you've got people who shouldn't be in there," Gartman said. "You could see a day when stocks get hit and gold could really get hit, because it's been a profitable area and (you could see) margin-call selling and speculative selling and people saying it's the only place I can get capital."

Darrin Newsom, an analyst at DTN in Omaha, is a bit less bullish about wheat and soybeans as demand is expected to wane with the new harvest. But he's holding true to his earlier forecast that corn will surge well beyond $6 a bushel -- three times its level of just a year ago -- and believes agricultural commodities overall will remain high.

"I'm not seeing anything out there that says this bubble's about to burst," Newsom said.