U.S. Markets closed

Comparing Corn, Gold ETFs Could Yield Bushels of Results


Even with gold’s two-year fall from grace, exchange traded funds backed by the yellow metal are among the largest commodities funds.

For example, the The SPDR Gold Shares (GLD) , iShares Gold Trust (IAU) and the ETFS Physical Swiss Gold Shares (SGOL) hold over $35 billion in combined assets under management while agriculture ETFs are comparatively small. That lack of heft for agriculture exchange traded products belies opportunity in evaluating the obscure gold/corn ratio.

The Gold/Corn Ratio is defined as the number of bushels of corn one could buy with the proceeds from selling one troy ounce of gold at a specific day’s settlement prices, according to Teucrium, the issuer of the Teucrium Corn Fund (CORN) .

In updating the gold/corn ratio for the first quarter of 2015, Vermont-based Teucrium finds that “while the gold/corn ratio was historically above its 38 year mean at the end of 2014, other major agricultural crops were also very near all-time historic highs for the same time period. Charts for the gold/wheat, gold/soybean, and gold/sugar ratios are shown below. The gold/wheat ratio was 63% above its 38 year mean value, the gold/soybean ratio was 70% above, and the gold/sugar ratio was nearly 76% above its historical 38 year mean average value.”

The gold/corn ratio currently resides at 298, meaning it takes 298 bushels of corn to buy one ounce of gold. That is off the high of 377 seen at the end of third quarter of 2014, but still well above the mean of 165 from 1976 through the end of last year. [A Look at the Gold/Corn Ratio]

“Historical data for the gold/corn ratio suggests that a mean reversion4 from December 31, 2014 levels of 298 bushels to the 38 year mean value of approximately 165 bushels of corn for each ounce of gold (bu/oz), could benefit an investor rebalancing gold for corn within their portfolio,” according to Teucrium.

Currently, the corn market is strengthening on greater demand. According to the United States Department of Agriculture, private exporters revealed that 6.56 million bushels of 2014/2015 corn was sold to an unknown destination, Farm Futures reports.

Investors added nearly $71 million to CORN last year while pulling over $3.2 billion from GLD.

“Investors and advisors need to make an assessment of the relative value of gold versus their other portfolio constituents, including agriculture, and appropriately adjust their allocations to suit their individual investment needs and objectives,” said Teucrium.

Gold/Corn Ratio


Chart Courtesy: Teucrieum

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.