Gold at 10 times oil history?

JungleFever

Do you follow the gold/oil ratio of 10 to 1? I only heard about it a year ago, and never researched it or gave it any thought. Now I am interested in learning more.

Gold at 10X the price of a barrel of oil that is. Supposedly a long term rule of thumb. I have way to many activities I'm researching now, I'd appreciate any help.

Thanks folks

direwolf1972

Since oil is only currently at 7.5/1 currently I dont think this idea works. And I believe its been holding steady in the 7/1ish range for at least a few months.

Cam40

recently i heard someone mention the historic price of silver vs. a gallon of gas.
ie: 25c silver quarter= 1 gallon of gas.
today that same quarter is valued at ,guess what, ,,about the same as a gallon of gas.

RedTiger

An article with a chart:

http://mybackpagesbyjessefelder.blogspot.com/2008/06/chart-of-day-oilgold-ratio.html

link

>>
The caveat is that things do change, when each market is free to float, and only fixed rates stay constant. Historically, oil and gold are closely correlated, 84% according to link2, which also outlines a trading strategy.
from
http://seekingalpha.com/article/84838-oil-gold-arbitrage-opportunity
link2


<< <i>The 1968-2008 Gold to Oil Correlation is .84. >>



Even though .84 is quite a high correlation, personally, this wouldn't be enough for me to trade on. There has to be more. Times change, ratios change, the cliche is that the only constant is change.

/edit to add second link

JapanJohn

Gold and Oil are two separate commodities. I personally don't think you can relate one to the other. I could be wrong. I have been wrong before. You could ask my ex-wife. She'll tell you.

John

TomB

This ratio has fluctuated very much in the past and I would not think it a general rule.

JungleFever

<< <i>An article with a chart: http://mybackpagesbyjessefelder.blogspot.com/2008/06/chart-of-day-oilgold-ratio.html link >> The caveat is that things do change, when each market is free to float, and only fixed rates stay constant. Historically, oil and gold are closely correlated, 84% according to link2, which also outlines a trading strategy. from http://seekingalpha.com/article/84838-oil-gold-arbitrage-opportunity link2

<< <i>The 1968-2008 Gold to Oil Correlation is .84. >>

Even though .84 is quite a high correlation, personally, this wouldn't be enough for me to trade on. There has to be more. Times change, ratios change, the cliche is that the only constant is change. /edit to add second link >>



Thank you very much for doing all the research I needed on this subject. There is so much speculation such as this recent Geroge Soros Forbes article

Best, Larry

Tvac897

It would make sense that a correlation was drawn by economists at some point relating the two.

roadrunner

If there is a way to blame gold for the high price of oil, then an economist or politician will do so.

Note also that Dow/gold, Dow/oil, as well as Gold/oil follow cyclical trends and ratios. Right now gold/oil is at the bottom of historical trends.
That would imply that gold will be outperforming oil for probably most of the remainder of 2008. Makes perfect sense to me.

Dow/gold has been trending down from a high of 60 or so, on it's way towards single digits. These are historical trends that follow typical bull markets is stocks and gold.

roadrunner

ajbauman

<< <i>Gold and Oil are two separate commodities. I personally don't think you can relate one to the other. I could be wrong. I have been wrong before. You could ask my ex-wife. She'll tell you. >>



Actually I did an excercise a while back on the relationship between gold and oil, and the correlation coeffecient was in the 90% - 95% range since 1970.