You can see how there is no quarterly low above 25 and there are peaks up to 27 and just over 28.
Time will tell if the past is a useful reference for the present.
Tim 1:08PM Friday, January 9, 2015 25.53 ratio XAUUSD/CL1! Gold/Crude Oil
One ounce of gold shot up to nearly 46 barrels of oil!
Now that is a serious supply glut!
Tim March 31, 2017 5:09PM EST
IMO Crude will test $40 and stay there until the P&E industry's hedges begin to run out in Q2/Q3, then the junk debt defaults begin as the producers fold. The rig count drops, and only then does Crude rise - as does Gold, but on debt default fears and inflation re-appearing as the job numbers collapse in the mid West and QE looks to begins again, devaluing the dollar, causing crude to rise further.
I don't "buy" that a Gold/Crude ratio of 22+ is a reason to buy Crude - and especially not swapping it for any existing Gold positions, and double that for any physical bullion positions. I completely agree with you that the ratio is historically high - but then so is the Gold/Silver ratio too. I'd suggest the ratio is out of whack due to much bigger games at play, and in no small part due to central bank funny money as much as anything else. You are right that the ratio will correct to the mean at some point, but not because the ratio is high - that's the correlation, but because the actors and games will change, or at least have a reduced impact, and that's the causation to bet on.
As you point out that is fundamental analysis, how you'd chart "games" like that technically are beyond my skills. The other problem I have with simplistic ratios like these is the supply side issues. Gold peaked in 2009 on Eurozone default and hyperinflation fears, just as the LTO boom started feeding in supply from the US & Canada. IMO we'd need to factor out supply issues with Crude to get a real demand rather than supply side ratio, assuming Gold production changes aren't significant factors due to market size.
Personally, my fundamental positions are 2016/2017 Calls on TLT and Puts on JNK & FXE, and recent technical short term puts on GLD/GDX that I swap for physical positions when I can, because long term I'm a hard hat wearer ;-) I also wonder how the Greek elections, Draghi's bond purchases, and Venezuela's oil funded debts might all conflate together....
I appreciate your response and excellent key factors that may drive markets into the future. I do want to put as many fundamental trends in my favor when I search for technical trade setups. The depression in the oil producing sector from bad debts will be a bigger mess than the Mexican crisis back in the 1980's where we needed Brady Bonds to bail out the whole situation. I wanted to correct the Gold peak date to 9/2011 (instead of your 2009 peak in Gold comment), I'm sure that was just a small oversight. I would like to review all of your charts and fundamental perspectives. Thanks for your response and look forward to any further comments and insights that you have. Tim January 28, 2015 1:30AM EST
In this situation, the move against the oil and gold price per ounce of gold caused the barrel to reach 25 times. This amount, before 1998 (when Russia was bankrupt because of high debt and a turbulent oil market, to buy gold action) was experienced.
Although this is a signal that the spread of negative inflation (deflation), but experts have different opinions. In fact, the drop in oil prices caused a sharp rise in gold prices due to supply and increasing concerns about the economic situation, especially in Europe, this fundamental difference, concerns about inflation can reduce the negative.
It's indeed a great chart, and I also feel like longing oil in recent days. But which way do you think is the best way to buy oil? Just use ETFs like USO and OIL? I read something about these two etfs saying according to their operating method, the return will be a lot compared to the return on spot price of oil.