Gold/Oil Ratio Redux

I continue to monitor the Gold/Oil ratio (GOR). The last time I wrote about it was December, 2008. At that time Gold closed that day at $837 and Oil closed at $42.36. That is a GOR of 19.75.

Here’s the chart at that time:

Gold/Oil Ratio chart

20-Year History of GOR

Notice there were two peaks, a three step drop, a double bottom and then a BIG rally. We are experiencing the same thing again.

Gold/Oil Ratio from 2011

Gold/Oil Ratio from 2011

We don’t see the first peak in 2011, then we have a three step drop, a double bottom and then… I think we may be setting up for another rally in Gold (and Silver). Oil is now at $106, Gold is $1,317. At a GOR of 20, assuming Oil stays the same, Gold could be trading at $2,120. With all the chaos in the world, suppose Oil goes to $150. Gold could then be $3,000. Silver is currently $21. At $2,120 Gold Silver could be $141; At $3,000, Silver could be $200.

No guarantees, of course.

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