Oil Priced In Gold

Posted by barkand on September 19, 2010 under Bollinger bands, Commodities | Be the First to Comment

This blog is re-started today with a long-term look at oil priced in gold. Here we see prices stabilizing at around .06 ounces of gold per barrel of oil, with quickly contracting Bollinger bands.

In the coming week, that long “black” candle (red on this chart) in the spring will drop out of the calculation and the bands will become even more tight. Sometime soon, we might expect a squeeze where prices will jump outside the bands and make a strong move. But in which direction?

My guess is that the oil/gold ratio will bump its head on the long-term downtrend line dating back to the middle of 2008, and then fall. Does that mean oil prices will collapse? Or that gold prices will spike higher? Or a combination of both? I don’t know. So, for those with the means to do it, the best way to play it is to be short oil and long gold.