I believe the long term gold to oil ratio is 1oz / 15 barrels.

Given that the oil price has now slumped to $35, is anyone worried that gold is going to follow suit and fall to the 500s? Or will all of the quantitative easing measures practiced by central banks worldwide bring gold's monetary characteristics to the fore?

I must admit that I'm a little concerned that oil will drag gold down.

Depends on how much of the bailout money leaks out I think.

If gold is a consensus of all the world currencies I can't see it rising exceptionally in value except against those countries that do print.

Were you worried when gold was $750 and oil $150/b? Gold has detached from oil and also from other base metals. It is trading on its function as money and not as a commodity. Time to worry is if central banks start jacking up interest rates rapidly as Volcker did early 80s.

I can't see that for a while. ZIRP policy being adopted by all C/banks right now to prop up the dysfunctional dollar. No more carry trades will be possible. Look for UK and then Euro zone to adopt ZIRP next.

It's a long term average, not a hard and fast rule on a month by month basis. Having said that when it spins out to extremes it might be wise to weight any new investments more on the undervalued side. Oil ETF for my Christmas present, rather than a couple of Krugs if you see what I mean.

Hmmm did the ratio have any affect when oil was as $145 and gold should have been 2000+ ??

No point looking at ratios right now, too much intervention going on and not giving the fundamental ratios a chance.

Gold will not see anything like 500 in my opinion and oil is due a bounce when the supply/demand/exploration/discoveries/currency/inflation fundamentals realign in 2009. I'm preparing to bang all my dry powder in LOIL.L over the next couple of weeks.. IMO there is mych more bang for buck than GOLD/SILVER at the mo' in OIL, anyways i have plenty of the shiny stuff.

Only WTI is at 33. Brent is at over 44!

Revisit of the Tight-Bound Relationship Between Gold and Oil - John Lee

Good article.

Long range chart


"The lower and upper horizontal bands in the chart above show an oz of gold has exchanged between 22 and 10 barrels of oil since 1989. The ratio dipped to as low as 7 and right now it trades at 20. One shouldn't buck against the trend and I expect the ratio to exceed 20 to reach perhaps 30 or more.

You can play with two of the three variables (oil, gold, and ratio) and come up with the third. For example, at ratio of 30 and oil price of $50/barrel, the formula produces a gold price of $1,500/oz. I honestly have no idea what future lies, except

• Oil is oversold and cheap
• Gold is not expensive by historic means
• The gold-to-oil ratio will keep rising until it comes down."

/more: http://new.goldmau.com/article.php?id=1222

Update: about 20:1 : $40 x 20 = $800

Thanks for everyone's opinions.

I ended up selling a small Bullion Vault position that I was originally averaging in with Sterling and re-entered orders at a lower price.

I also bought some more 1oz Eagles with Dollars and got hit on a tiny order for 50 USO @ $29, which I plan to build up. I sold my last 50 USO position for $110, which is quite pleasing in hindsight.

Logging into Bullion Vault today after Christmas was a nasty suprise I just hope there's a pull back on bigger volume so the new BV orders get hit.

I've really messed up the latter half of this year trading / investing with Dollar savings instead of Sterling.

Oil going to $25 according to this guy:

http://www.marketoracle.co.uk/Article7905.html

As of today the ratio is 23

golds fine. its got no productive use of any significance, yet its held its ground better than anything else over the last 4 months.
thats enough to keep me confident.