As the chart below shows, oil looks like it is trapped in a $76-$82 range. Don't be fooled by that range, there is solid reason to believe oil could once again get close to $100, a level not seen since September 2008. Why?
Historically, the price of oil vs. gold has been between about 12:1 and 15:1. When the USD is losing value, the ratio tends to be lower (that is, oil goes up relative to gold as oil producers raise dollar-denominated prices to maintain the value of oil), and since 1/2001 has often been 10:1 or lower.
With oil at about $80/bbl and gold at $1146, the ratio is now 14.33. If oil just hits the higher end of its average (12:1) that implies it could go over $95.
Much will depend on the strength of the recovery and of the US dollar. Over the past 2 years the dollar has behaved as a safe haven currency, dropping when there is good economic news, and rising on increased fear. There are2 clear current market trends:
Increasing global economic recovery
Continuing down trend in the USD
If these continue, a lower than average gold/oil ratio is likely and thus (assuming gold does not go below its current $1146 level) and thus even higher price for oil.
WTI Crude Oil Daily Chart
Special thanks to fellow SA contributor Ashraf Laidi (Currency Trading and Intermarket Analysis: How to Profit from the Shifting Currents in Global Markets) and friend Munjid Albader for their inspiration & guidance.
Disclosure: The author has no positions in crude oil at this time, but does hold selected energy equities on a long term basis (ERF, PGH, and PVX).
I'm Абрам Александр a businessman who was able to revive his dying lumbering business through the help of a God sent lender known as Benjamin Lee the Loan Consultant. Am resident at Yekaterinburg Екатеринбург. Well are you trying to start a business, settle your debt, expand your existing one, need money to purchase supplies. Have you been having problem trying to secure a Good Credit Facility, I want you to know that Mr Benjamin will see you through. Is the right place for you to resolve all your financial problem because am a living testimony and i can't just keep this to myself when others are looking for a way to be financially lifted.. I want you all to contact this God sent lender using the details as stated in other to be a partaker of this great opportunity Email: 247officedept@gmail.com Or WhatsApp/Text +1-989-394-3740.
ReplyDelete