Gold - Oil Ratio
In this post I am going to discus the gold - oil ratio. It is the price of a gold ounce divided by the price of an oil barrel (West Texas Intermediate or WTI). So the higher the value of the ratio gold is overvalued with respect to the oil, the lower the price of the ratio gold is undervalued.
The first chart is this ratio and the second the oil barrel price in USD.
It can be concluded that the price of oil is very volatile, either measured in USD or in gold ounces. However it is more stable if the price is measured in gold.
In the last 20 years the minimum of the oil price was 11.37USD (in November 1998) and the maximum 139.96USD (in June 2008), the ratio between these two values is 12.3x.
So if it is measured in gold ounces the minimum was 6.38 (in August 2005) and the maximum 39.15 (in January 2016). So the ratio is 6.14x.
Moreover if we see the chart of oil prices in USD, adjusted by inflation. We get the minimum of November 1998 is 17USD and the maximum of June 2008 is 156USD, so the ratio is 9.17x, higher than the corresponding ratio measured in gold.
From this remark, we can see further evidence that gold is a better instrument for preserving the value of different assets (in this case oil) than USD.
Disclaimer: This is not financial advise.
Source of the charts: http://www.macrotrends.net
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I am glad that you like the post.
Yes Gold-Oil Ratio is an interesting way to see these data..
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Just shows how much volatility the US$ introduces into the system my friend. Cheers