Oil, Gold, and New Ways to Profit

THE LAST TIME we looked at the gold/crude oil ratio, it was coming off an all-time low. But with gold’s move to $533 in trading here in my part of the world, it’s time to look at the ratio again and what it means for oil, gold, and you. Here’s what I wrote in late August:

“The age of peak oil has arrived, but its investment and economic consequences are just beginning to filter down to the consumer level. Individual standards of living will be affected as permanently higher energy costs make their way into your daily life. And as you can see from the chart on the next page, oil’s move up to $65 and above signals a bottom in the crude oil/gold ratio.
“That means two things: First, it takes fewer barrels of oil than ever to buy an ounce of gold. So far, this has been evidence of oil strength, and not of gold weakness. Gold futures are in the $450 range as we go to press. The ratio, then, can’t be explained away as gold weakness.

“The second thing the ratio indicates is coming gold strength. This will happen even as oil prices climb higher. Obviously, that means gold prices have to climb faster than oil prices. In the inflationary scenario I describe below, you’ll see just how that happens. If you don’t yet have a position in physical gold or gold stocks, now is the time to take one.”

HoweStreet.com