Did Commodities Actually Hedge Sector Risk During COVID?

[WITH CODE] A DCC-GARCH check on gold, silver, wheat, and corn against four US equity sectors, 2014-2024.

Hello and welcome back to another paid post!

Today we will take a look at how Gold’s reputation as a universal hedge doesn’t hold up (and briefly inverted), while corn quietly outperformed its “weak safe haven” reputation as a consistent volatility reducer.

Let’s dive right in.

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Introduction

A 2025 working paper by Grant, Moodliar, Rissik and Huang raised the question whether hard commodities (gold, silver, platinum) and soft commodities (corn, soybeans, wheat, livestock) behaved as hedges or safe havens for US equity sectors between 2014 and 2024. Using wavelet coherence and DCC-GARCH models across eleven GICS-classified sectors, we find that gold’s traditional role as a strong hedge deteriorated after the COVID-19 pandemic, that silver and platinum grew more positively correlated with cyclical sectors, and that soft commodities such as corn and wheat became weak but improving safe havens, with corn and wheat increasingly favored in optimal portfolio construction during the pandemic period.

We isolate four commodities (gold, silver, wheat, corn) against four sectors (Financials, Energy, Utilities, Materials), rebuild the DCC-GARCH pipeline from scratch using daily ETF proxy data, and ask a narrower and more falsifiable question: did the correlation structure between these assets actually shift around COVID, and if an investor had mechanically applied the resulting hedge ratios, would their portfolio have actually been less volatile as a result? The second half of that question, real realized volatility reduction rather than a theoretical hedge ratio, is not something the original paper focuses on, and is the main addition here.

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Data and Methodology

Daily adjusted closing prices were pulled from Tiingo for 1 January 2014 through 31 December 2024 (2,768 trading days after return calculation). Four sector SPDR ETFs stand in for the Bloomberg GICS sector indices: XLF (Financials), XLE (Energy), XLU (Utilities), and XLB (Materials). Four commodity ETFs stand in for continuous futures: GLD (gold), SLV (silver), WEAT (wheat), and CORN (corn). This substitution is a real limitation worth flagging up front: ETFs carry expense ratios and can drift from spot or front-month futures pricing, and standard EOD data providers such as Tiingo do not carry continuous futures series. The substitution is reasonable for a correlation and hedging study, since ETF returns track the underlying commodity closely at daily frequency.