Gold is a component in an array of investment ratios, most notably the gold/silver ratio, or the measure of how many ounces of silver it takes to buy one ounce of gold.
The gold/corn ratio is undoubtedly one of the less heralded gold ratios, but commodities investors ought to listen to what this ratio is currently saying. 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 (NYSEArca: CORN).
The SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and the ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) have each tumbled about 6% over the past 90 days, but even with those declines, gold appears overvalued relative agriculture commodities.
“Examining quarterly data from the beginning of 1976 (the year that gold started trading freely in the United States) through the quarter ended September 30, 2014, suggests that gold is over-valued relative to historical price relationships with the major agricultural crops of corn, wheat, soybeans and sugar,” according to a recent research note published by Teucrium.
The timing of examination of the gold/corn ratio is important as it appears the ratio is proving efficacious. Over the past month, GLD and friends are up about 1%, but with Monday’s gain, CORN is up nearly 12% over the same period. [Be Picky With Commodity ETFs]
“The gold/corn ratio may have been at its historic 38 year high at the end 2014’s third quarter, but other major agricultural crops were also very near all-time historic highs for the same time period,” notes Teucrium.
Some of those other ratios are working as well. For example, the Teucrium Wheat Fund (NYSEArca: WEAT) has added more than 7% over the past month while the Teucrium Soybean Fund (NYSEArca: SOYB) has surged 8.2% when including Monday’s gain. [These Commodities ETFs Buck Outflows Trend]