GOLD OIL RATIO 2008

This is a follow up post to the JAN 6, 2008 post.
http://thebullishbear.blogspot.com/2008/01/goldoil-ratio.html
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 ???

The Bullish Bear on REUTERS ! !

Posts from this blog made it to REUTERS :

Here are the Links :


http://www.reuters.com/article/blogBurst/investing?type=hotStocksNews&w1=B7ovpm21IaDoL40ZFnNfGe&w2=B7pJeHult9GszE37UXlSpmUm&src=blogBurst_investingNews&bbPostId=Cz6oZBKat1SiPCzCCiaoTiqh6vBB9orR4tFaYuB51ZqKndcCXt&bbParentWidgetId=B7gSUbux1hpbz8uOa7TWsLnV

http://www.reuters.com/article/blogBurst/investing?bbPostId=Cz6oZBKat1SiPCzCCiaoTiqh6vBD6J6UuNbgMUCz9LhOt7RnVMC

http://www.reuters.com/article/blogBurst/investing?bbPostId=Cz6oZBKat1SiPCzCCiaoTiqh6vCzBI1xV3Pgj1MBEAYpBRABEO8

http://www.reuters.com/article/blogBurst/investing?bbPostId=Cz6oZBKat1SiPCzCCiaoTiqh6vCzEeSknsLIbVKCz8d7NOQ0SuGJ

THE GOLD/OIL RATIO

The GOLD Oil Ratio is calculated by dividing the gold price by the oil price.

Gold-Oil Ratio = Price of Gold (per oz.) / Price of Crude Oil (per barrel)

Rising oil prices result in decreased consumption and a slow down in the economy, and negatively affect stock markets. On the other hand, in times of crisis, uncertainty and rising inflation gold is always looked to as a safe haven.

Recently, we have seen both gold and oil rally, as the US Dollar continues to decline.


So are we overdue for a pull back?

A high gold oil ratio = either gold is too expensive or oil is too cheap = SELL GOLD, BUY OIL

A low Gold Oil Ratio = either gold is too cheap or oil is too expensive = BUY GOLD, SELL OIL

Historically, the Gold Oil ratio has support between 8 and 10 barrels per ounce of gold, & spikes over 20 are shortlived.

Is the gold oil ratio going to rebound?
1) oil falls and gold rises
2) gold rises faster than oil
3) oil falls faster than gold

With all the momentum in gold prices recently; fueled by a rising unemployment rate, an increased likelyhood of a recession in the US and a falling USD, gold prices could rise still further, even though gold currently looks overbought.
The possibility of a large FED rate cut is adding to the strength in gold.
Fresh buying can be avoided, waiting for a pull back.

Oil prices are facing a psychological resistance at the $100 mark. Geopolitical concerns, supply disruptions and a falling usd are fuelling high oil prices. A break past $ 100 could propel prices still higher, while a recession in the US will be oil negative.