WHY DOES GLD/TLT STILL WORK?

This is a free preview of a paid episode. To hear more, visit www.russell-clark.comBack when I first started writing this substack, I was greatly influenced by the idea of systemic food inflation leading to rising wages and rising interest rates. The key driver was that China was no longer self sufficient in grain due to structural shortage of land and labour. It suddenly became the world’s biggest importer of corn, and has remained so.One trade that I thought would capture this shift was a long gold/short treasury trade, GLD/TLT, which has worked a treat.The problem is that I thought agricultural prices would stay well supported. They have not. Corn prices have fallen dramatically, as have fertiliser and other agricultural commodities.This has left me in a quandary. If agricultural commodity prices (and for that matter oil and natural gas prices as well) are weak, then surely, I should reverse the GLD/TLT trade? Deflation must be more likely. When we look at flows into GLD and TLT that is the way the investor community is thinking, even if price action is the other way.Food production was a constraint that I could see in China, and I thought would be made worse by the Russian war in Ukraine. But price action in agricultural markets and energy markets have proved me wrong. And yet GLD/TLT continues to trade well. Following the maxim that market price is truth, I have tried to let the market tell me why GLD/TLT is working.