I have been talking about the Gold/Oil Ratio since February. I called for 1% interest rates and sub 2% Treasury yields (I meant 2 Year Treasuries, I thought that was implied). Although I was not very knowledgeable about gold then, I’ve had a lot of time to learn. That’s besides the fact that I called 2 key trends 9 months before they happened. I got the call on Oil despite the fact that it rallied 50% because I never called a sell.
Here is a historical look at the Gold/Oil ratio again:
Historical Oil vs Gold
Even more interesting is the fact that the Gold/Oil ratio closed at 15 on Thursday and 16 on Friday. Could we really begin to see 30 multiples again? Zigler and I both say yes. But how will this play out?
I once thought we would see both expensive gold and oil. However, recently it looks like we will see a high multiple of the Gold/Oil ratio due to cheap oil and above $1,000 gold. With Oil trending to $30, that would mean a gold oil ratio of 33! A reversion to the mean of 15 could then take place through an oil rally rather then a gold plunge. Where as before I was bullish on gold and oil, now I am only bullish on gold.
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