Is Corn the Food Gold Standard?
Gold and Corn End Year Higher, Even After Sell-Off
Associated Press -- January 1, 2012 -- NEW YORK -- Gold and corn prices ended the year higher Friday, even after sell-offs that wiped out big gains from a summer rally.
The February gold contract rose $25.90, or 1.7 percent, to settle at $1,566.80 an ounce. Corn for March delivery gained 8.5 cents to $6.465 per bushel. Both gold and corn hit all-time highs this summer, and both commodities fell this winter for different reasons.
Not all metals ended the year higher. The downturn this fall left both silver and copper down for the year, with copper dropping more than 20 percent.
But gold and corn, two of the most high-profile commodities, kept their value from a volatile year. Gold was driven higher by anxious traders who didn't want to invest in riskier stocks or bonds. Corn prices shot up on worries of a global food shortage. Those worries receded this fall as stocks rose and food supplies grew.
Even though prices have fallen, many traders think 2012 could offer another roller coaster of a ride for commodities investors.
"I think it'll happen all over again," analyst George Gero said about the spike in gold prices. He said 2011 marks the 11th straight year that gold has closed higher. With political tensions brewing in North Korea and Iran, and financial problems continuing in Europe, Gero said gold's rise is far from over.
Corn prices have already started climbing again on persistent worries that growing demand will outstrip supplies. Booming demand for livestock and crop-based fuels has outpaced farmers' ability to grow more food.
Gold is still up about 10 percent from its closing price of $1,421.40 at the end of last year.
This summer was a hot one for commodities trading.
Gold closed at a record high of $1,891.90 Aug. 22. The big jump came after ratings agency Standard & Poor's downgraded U.S. debt, leading investors to become fearful of turbulence in financial markets. That anxiety make gold a relatively safe bet for investors looking to protect their money.
Gold prices started to sink this autumn after traders started to think gold prices had been driven too high by speculators. Inflation fears also started to decline after reports showed the U.S. economy was gaining steam, and the dollar started to gain value against the euro.
Corn rose and fell for different reasons. For the past decade, demand for grain and beans has risen faster than supplies. More consumers in Asia are eating meat, so the livestock industry there is buying more feed. In the United States, federal ethanol mandates mean that about 40 percent of the U.S. corn crop is used to make gasoline.
The supply worries pushed corn to a record $7.99 in June. But the high prices lured farmers into planting more corn. A hot summer didn't damage the corn crop as much as traders thought it would, and by this fall the world corn supply looked much healthier than investors expected.
The surplus corn prices pushed corn below $6 a bushel, which made prices negative for the year. But prices rose in December because hot weather in South America might cut exports from that region. Corn is now slightly higher than the $6.29 closing price at the end of last year.
Most commodities closed higher Friday. March silver gained 60 cents to end at $27.915 an ounce. Still, silver is down 10 percent from its closing price of $30.94 on Dec. 31 last year.
Copper for March delivery gained 6.6 cents Friday to end at $3.436 per pound. That leaves copper down 23 percent from its closing price of $4.45 per pound on Dec. 31.
Other industrial metals also gained Friday. March palladium gained $32.40 to $656.15 an ounce. January platinum rose $38.10 to $1,404.90 an ounce.
March wheat gained 7.5 cents to finish at $6.5275 per bushel. January soybeans rose 10.75 cents to $12.0775 per bushel.
Benchmark crude oil lost 82 cents to finish at $98.83 per barrel on the New York Mercantile Exchange. Heating oil fell 0.59 cents to end at $2.9142 per gallon, gasoline futures dropped 1.2 cents to $2.6574 per gallon and natural gas lost 3.9 cents to $3.016 per 1,000 cubic feet.