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Gold & Grains w/ Dennis Gartman

With gold hovering near 18 month highs and a bountiful corn harvest around the corner, what better time to hear from commodities king Dennis Gartman!

Gold

Gold prices hovered near 18-month highs on Thursday despite some profit taking as the weaker dollar continued to buoy this precious metal. It seems investors are using gold as a hedge against inflation as well as U.S. Treasurys.

However traders are at odds over the next move after two Fed governors suggested the central bank may soon take up a tighter policy.

Some believe if interest rates start to creep higher and the dollar gets stronger, the resulting move in gold could be precipitously lower.

However, others remain bullish citing stronger demand for bullion and gold as an alternative to other currencies, not only the dollar.

What’s the trade?

I’m bullish but gold is an overpopulated trade, says Gartman. And I don’t trade gold in terms of dollar. I trade it in terms of sterling and the euro. I’m short sterling and eruos.

And don’t trade gold with the miners, adds Gartman. You’re at the mercy of strikes and management troubles. Instead look at the GLD.

Jim Iurio of TJM is bearish of gold. On Fast Money’s Halftime Report he says if the dollar gets stronger gold could see $960 very quickly.

Corn and Grains

Near perfect weather for growing corn has farmers predicting one of the best harvests on record.

"This is probably the best corn crop I've raised," says Darrel McAlexander from his farm in the southwestern Iowa town of Sidney.

It's the same across the country with projections calling for 13 billion bushels. That would be just shy of the 13.04 billion bushels harvested in 2007.

The expected harvest has helped drive down corn prices from about $4.30 a bushel in early July to $3.17 currently. That's a drop from a peak price of more than $6.80 a bushel in mid-2008 when prices soared because of increases in ethanol production and demands by the livestock industry.

What’s the trade?

In my hedge fund I was short Potash, reveals Gartman but that wasn’t the trade. However, looking ahead it seems to me the decline in corn prices will result in more soybeans being planted and that requires less nitrogen in the soil.

The giant crop is good news for farmers and livestock producers, who should benefit from lower feed costs, but it probably won't make a big difference to the cost of groceries.

Although corn is a key ingredient in countless products, from Coke to corn flakes, most of a product's cost is tied to labor and transportation, not ingredients, says Kent Thiesse, a farm management analyst at MinnStar Bank.

"Depending on what you're looking at on the store shelf, less than 25 percent of the cost goes back to the base product," Thiesse said.


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Trader disclosure: On Sept. 17, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AA), (F), (BAC), (EEM), (FXI), (SBUX), (VIP); Seymour's Firm Owns (MTL); Finerman's Firm Owns (BAC) Preferred Shares, Finerman Owns (BAC) Preferred Shares And Owns (BAC); Finerman Owns (PDE); Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC); Finerman Owns (WFC) Preferred Shares; Finerman Owns (RIG) ; Finerman's Firm Owns (WMT), (RIG), (MSFT), (NOK), (PBR), (PDE), (TGT); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO), (IYR); Najarian Owns (AAPL) & Short (AAPL) Calls; Najarian Owns (ACI) Call Spread; Najarian Owns (BAC) & Short (BAC) Calls; Najarian OWns (C) Calls; Najarian Owns (CUX); Najarian Owns (FCX), Owns (FCX) Put, Is Short (FCX) Calls; Najarian Owns (GE) Calls; Najarian Owns (JPM) & Is Short (JPM) Calls; Najarian Owns (JOYG) & Short (JOYG) Calls; Najarian Owns (MS) And Is Short (MS) Call; Najarian Owns (MSFT) And Is Short (MSFT) Call; Najarian Owns (PALM) Calls; Najarian Owns (RIMM) Call Spread; Najarian Owns (TEVA); Najarian Owns (V) & Short (V) Calls; Najarian Owns (WFC) Put Spread; Najarian Owns (YHOO) Calls ; Najarian Owns (WNR) Calls; Terranova Owns Gold Futures; Terranova Owns Dec Crude Contracts; Terranova Owns Dec 2010, Dec 2012 Crude Contracts; Terranova Owns (WNR) & (WNR) Calls; Terranova Owns (HOC)

For Dennis Gartman
Gartman Owns Gold
Gatman Owns Canadian Dollar

CNBC.com with wires