timwest
Long

Crude Oil Versus Gold - XAUUSD/CL1! - Gold/Crude Ratio - Peaking

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Gold             versus Crude Oil             - 1 ounce of gold             buys 25 barrels of oil             .

When Gold             gets you 22+ barrels of Oil             = Buy Crude

Time to Buy Crude with your Gold             Holdings!

10-Year Level of Valuation Here = Time to act NOW.

Tim 1/7/2015 3:06PM EST Wednesday

24.92 Ratio of XAUUSD/CL1!
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Stockman
2 years ago
Nah....buying oil now is a suckers bet, bottom not in yet newb
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timwest PRO Stockman
2 years ago
Stockman, how are you making your decisions when you say "suckers bet" and "newb"?
+1 Reply
timwest PRO
2 years ago
I hope this is clear. Sell gold to buy Crude. This is a massive market opportunity for long term positions.
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jangseohee timwest
2 years ago
Yes, Value investing!
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It's interesting, but that idea came out weeks ago and crude continues to fall.
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jangseohee CommoditiesTrader
2 years ago
Lets wait til it hit 28-30!
+1 Reply
tompower jangseohee
2 years ago
plus what happens if both move down at the same time, there goes your great scenario.
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jangseohee tompower
2 years ago
i only need oil, fondling with gold is not for me at the moment
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imbhk
2 years ago
what about XAU/USD?
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timwest PRO imbhk
2 years ago
I think Gold could be flat or rally, but the money will be made from crude oil going up relative to gold. The ratio is clear to me - gold is at a great level to top out relative to crude oil.
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LastBattle
2 years ago
How are you investing into oil? Stocks?
Futures/options have a relatively short timespan to profit from that difference..
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timwest PRO LastBattle
2 years ago
OIH, XLE, USO, Crude Futures, Heating Oil Futures ( I live in the northeast of the US where we use a lot of heating oil).
+2 Reply
LastBattle timwest
2 years ago
Thanks :) I'll be sure to take a look at those.
Appreciate that..
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timwest PRO LastBattle
2 years ago
There are futures contracts that have long duration - a year or more is available.
+1 Reply
jangseohee timwest
2 years ago
I know there is an expensive leap year options (1-2 years expiry) but I just learn that we have leap year futures?
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timwest PRO
2 years ago
As for timing - if you see "range expansion" like we are seeing this week, you can wait for an additional 3 weeks for this move to end. NOTE ALL THE OTHER RANGE EXPANSION WEEKS and see that the market continued another 3 weeks. However, given the absolute level where we are trading, this is a solid enough level to act with confidence. If oil continues for another 3 weeks, then it just gives you more oil to buy if you spread your entry out over time. I am not trying to be a hero here and call this the bottom, but I am saying this is an excellent risk/reward level to begin. I'm hearing everyone talk everywhere I go about oil going lower, but I didn't hear them say that when prices were higher. The momentum of prices is finally giving everyone a level of confidence that it is worth starting now to take advantage of a WINDFALL situation.
+3 Reply
SS96 PRO timwest
2 years ago
you only have 7 years of historical data. too small of a sample!
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SS96 PRO timwest
2 years ago
imagine if '09 TOP does not hold!
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jangseohee timwest
2 years ago
i am in talk with a bank to refinance my house for a period of 2.5 years, ready to "Show Hand" for long if Oil falls below 30 :-)
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SS96 PRO jangseohee
2 years ago
pretty dumb idea to use your house to finance trading.
-2 Reply
timwest PRO SS96
2 years ago
If anyone invests and also has a mortgage, then in fact that is what they are doing. So, I voted down your comment. If you are a wise speculator, then borrowing to buy a house (and fund your Investment Account) at ridiculously low interest rates is a very smart decision.
+3 Reply
jangseohee timwest
2 years ago
Sound fundamental logics
+1 Reply
justatrader PRO timwest
2 years ago
You mean use part of the mortgage funds to fund investments vs. trading with a smaller capital or taking a loan directly?
+1 Reply
2use
2 years ago
Gold goes up or Oil ? Both at lows. But the pair close to a high - but you are saying sell gold, buy oil? The reason the pair went up because oil dropped like smth dead, so i would expect a play from oil to correct this. Stocks ride high, so people would still hold on to gold as the higher the stock markets, the more people would have something in safe heavens. Oil seems to be a political move, and those don't last long.
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justatrader PRO 2use
2 years ago
I think you got it mixed up. The above is a spread chart. It doesn't imply that one should sell Gold and buy Crude. Rather, you sell your gold positions to buy crude. Its a different thing compared to the mere buy/sell of an asset. This is a cross asset trade.
+1 Reply
Kautilya PRO
2 years ago
Tim, your posts have rationale and insightful analysis. Thanks again for all your analysis and charts.
+2 Reply
jangseohee
2 years ago
Hi Tim, nice
GC1!/CL1!, barter trade idea
+1 Reply
TimWest... What is your take on the Gold/Oil chart in regards to equities? I keep an eye on a very funny analyst, who in recent times has been crying hoarse that when Gold/Oil peaks, its time to sell equities. Thoughts?
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timwest PRO justatrader
2 years ago
Falling crude oil has often been extremely bullish for equities with a 3-6-9 month lag, so I'll keep an eye on the "sell equities" concept. I am neutral on equities for a variety of reasons, strong US Dollar, high margin account balances, and Global Central Bank Money Printing (will likely end badly, at some point), and consensus bullishness by major banks for a higher market in 2015. There are positives too, like high profit margins at S&P500 companies, steady and slow economic growth in the US, falling oil prices (just discussed, and see my other crude oil versus S&P charts), and low inflation globally. In general, I like to find times to sell short the S&P to hedge the portfolio and I spent years on a trading desk where our job was to be bearish all the time. Why bearish? Because everyone makes money when the market goes up, in the brokerage business that is. So, the trading desk is there to make money when the market goes down. Trading volumes and commissions go down dramatically when the market goes down. Therefore, I am somewhat wired to look for the negative. If you see my year-ahead forecasts I've put out every year here at TradingView though, I have been generally bullish and generally correct. I'll be making my next installment soon for publication. THANKS for your question. Tim
+5 Reply
2use timwest
2 years ago
Awesome sumup - looking forward!
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Do you attribute this to demand for cheaper commodities for Value commodity investors? I see the value in the ratio but I don't understand it's causation.
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spyder69
2 years ago
I think it's too soon. You have the US, Saudi Arabia and Russia all trying to flex their muscles with oil. The fat lady hasn't started singing yet over these falling prices. Certainly money can be made now, but there is more money to be made off this. I bet this is going to break through the 2008-2009 dip. We have a good setup for a remix of 2008 in my opinion, bubbles galore and anti dollar brics nations. I say wait till at least $44 a barrel, then you'll have more money in the end... how much the dollars will be worth is anyone guess, but at least you would have more than you started with... thats the goal right?
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timwest PRO spyder69
2 years ago
Have you looked at selling $44 strike puts going out 6-9 months? Perhaps you could look at higher strikes that will net you a $44 entry price. If you sell the $50 strike puts for $6, that will net $44 entry and give you $6 profit if it is above $50 at expiration. Just an idea for you. I think a grind sideways over the next 3-7 years is highly likely from current levels in the stock market. The fundamentals have a long way to catch up to current stock prices, from my perspective.
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OzkOzn
2 years ago
gold/crude oil, at an interesting point, it gives me different point of view, thanks for sharing
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motcha1
2 years ago
Yeah I'm afraid this idea doesn't work Tim. The idea of such ratios is that if you have gold you'd sell it and buy oil.
It doesn't necessarily mean that Oil will rally against the dollar. You will need to show us a comparison with CL1! so we can see if Oil rallied against the dollar when your rule occured.
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tompower motcha1
2 years ago
looks like gold is breaking out relative to crude, looks like we'll be putting the electric car to rest again for another 10 years.
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timwest PRO tompower
2 years ago
The gold/crude ratio does still have a little momentum remaining, but I'm patient and think this is a good enough level to warrant shifting funds from gold investments and look to oil investments. As for the electric car "put to rest again for another 10 years", your comment made me laugh - good one. I recall GM closing their electric cars around the turn of the century. Do you follow my TSLA forecasts? I've been pretty active in forecasting and following TSLA. I think Elon Musk has a great grip on the electric car and his success is one reason the oil industry might be collectively interested in driving down the gas price to shut off the demand for the Tesla while it is still a very small company. His dual-drive Tesla is nothing short of amazing. The Model-X is going to be amazing. The $35,000 model may seem like a pipe-dream but if they do it, it will change the industry forever. Once the gigafactory is up and running, producing lower cost batteries, then you have a chance of slow death for ICE cars (Internal Combustion Engine).
+3 Reply
IvanLabrie TOP timwest
2 years ago
Really looking forward to that last forecast's realization Tim.
+2 Reply
mazdaki PRO
2 years ago
I agree, that it is time to buy crude but what is the best way to participate. Thinking of buying USO ETF. recommendations appreciated.
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