Gold/Oil Ratio = Price of Gold (per oz.) / Price of Crude Oil (per barrel)
The historical average for this ratio has been around 15.
Oil prices have been rallying sharply , and every correction in oil has resulted in gold selling off. Thus the ratio has declined to the current level of 7.13
Oil prices may be due for a correction, but gold appears oversold, indicating that 7 barrels of oil will buy an ounce of gold vs a historical average of 15 barrels to an ounce of gold!!!!
Although Gold prices took support around the $850 levels recently, historically the May -mid August period is a quiet period for gold. The news on the US Economy and the US Financial stocks shows no signs of improving, as was evident from the AIG results yesterday. Await further writedowns at the financials.
IS A REBOUND ON THE GOLD OIL RATIO LONG OVERDUE ???