Gotta See Oil!

THE DARWIN METALS ANALYSIS SHOWS PALLADIUM IS ON TOP

The gold-to-oil ratio currently stands at about 1 to 24. In other words, a single ounce of gold with futures prices at $1319.70 an ounce, is worth 24 barrels of oil priced at $53.79. Usually when this ratio spikes it is a precursor to a crisis because oil prices fall when economic growth is weak, while gold thrives in that environment. Some consider it a systemic risk indicator to look at in conjunction with volatility. Historically, values above 30 signal that oil is super-cheap compared to gold. Values below 10 signal that oil is too expensive and inflation may be running higher than gold is indicating, and therefore long term investors will want to favor gold. However, always note the current trends – currently the ratio is now below its average which means this trend could begin to be changing for the future.

THE DARWIN GOLD RATIO ANALYSIS FOR GOLD/OIL

The gold-to-oil ratio currently stands at about 1 to 24. In other words, a single ounce of gold with futures prices at $1319.70 an ounce, is worth 24 barrels of oil priced at $53.79. Usually when this ratio spikes it is a precursor to a crisis because oil prices fall when economic growth is weak, while gold thrives in that environment. Some consider it a systemic risk indicator to look at in conjunction with volatility. Historically, values above 30 signal that oil is super-cheap compared to gold. Values below 10 signal that oil is too expensive and inflation may be running higher than gold is indicating, and therefore long term investors will want to favor gold. However, always note the current trends – currently the ratio is now below its average which means this trend could begin to be changing for the future.

Trade smart,

Paul "Bulldog" Hudson, Chief Investment Officer
Darwin Investing Network