Gold Oil Ratio Chart
Posted by Frugal on May 19th, 2008
The run-up in gold on last Friday is good for investors, but probably bad for traders.
Oil is at all time high, while gold has sustained a 15% correction. While it is still possible for gold to come back down to $820 to $850, gold is a good buy for longer term horizon. If one looks at the gold to oil ratio chart, the ratio is currently at an extreme value. Sooner or later the ratio is bound to rise up. If you believe in crude oil going up, then you should believe in gold prices going up more.
Here is the recent chart from stockcharts.com:
A chart from Incredible Charts shows how extreme the current ratio is.
In a credit crunch (which is not over yet) where deflation occurs, the value of money goes up. And I expect that the value of real money (gold) goes up even more.
From the ratio chart, one can probably safely say that in the intermediate term, it’s probably good to either buy gold and/or sell oil.
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May 19th, 2008 at 7:24 pm
Frugal – I am wondering if in a deflationary environment, with the value of money going up, if the price of gold, denominated in dollars, would not go down. Some currency has to be held as the benchmark against which assets are going to inflate or deflate in value, so if the dollar is gaining in value, then all assets, gold included, would decline in price. Is that not correct? Peter
P.S. – Hope you find a good deal on a new laptop – let us know how you do!
May 24th, 2008 at 9:20 am
Although I sit with all the stock prices and comparing and making decisions, I never thought of OIL- GOLD chart what you have given. This is interesting… thanks
May 24th, 2008 at 2:12 pm
I have noticed a positive correlation between crude oil and gold prices. Is this because gold goes up in recessions, and higher fuel prices ought to trigger that?