On This Key Measure, Gold Looks Crazy Expensive

On This Key Measure, Gold Looks Crazy Expensive
Stéphane Renevier, CFA

over 3 years ago1 min

  • The gold/oil ratio shows the price of gold divided by the price of oil. A high ratio means gold is expensive relative to oil while a low one shows the opposite.
  • The ratio can be interpreted as a “fear” indicator as a high value shows investors are pushing the price of a defensive asset (gold) vs the price reflecting the health of the “real economy” (oil)
  • The ratio has historically been between 10x and 30x. It is now more than 50x!
  • What does the ratio tells us? Unless you believe that things are “different this time”, we should expect the gap between gold and oil prices to fall towards its historical range. It doesn’t necessarily mean that gold prices will fall, only that they will rise less (or fall more) than oil.
Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG