Looking at the Gold-Oil ratio you might wonder if we are close to the stop. Far from it. The gold-oil ratio has not moved much over the last 6 months. This is because the oil and gold price have been moving up together.Looking back in time, in fact, the fall of the gold-oil ratio occurs mostly because the rise in 'cost of living' inflation raises interest rates to an extent where economic activity is curtailed. Of course that hurts oil, and not gold since there is comparatively less industrial demand for gold whilst paper money is being debased. I suspect gold & oil prices will continue to rise until oil prices start crimping economic activity, then I suspect the oil prices & gold-oil ratio will fall, but gold prices will remain strong.
Andrew Sheldon www.sheldonthinks.com
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