The Gold to Crude Oil Ratio is Getting Jiggy

• Posted by Greg Harmon
• on November 6th, 2012

Gold ($GLD) and Crude Oil ($USO) went through a period of high correlation in 2009 which was quickly reset a bit higher in 2010 in to 2011. Since then though the relationship has been tenuous and may be on the verge of a major change. The ratio chart of Gold to Crude Oil below shows the two consolidation zones mentioned and now a break of a symmetrical triangle. That break is being retested now, and if it holds up there is a target of over 7 on the ratio, 36% higher than where it

Gold ($GLD) vs. Crude Oil ($USO)

stands today. The momentum indicators (RSI and MACD) shown in the chart are both supportive of a continued move higher as well. With Gold in the form of the $GLD at 163 and Crude Oil in the form of $USO at 31.60, that put broad limits on a potential move. With no change in Crude Gold would rise 36% to 222 and with Gold held constant Crude could fall to 23.15. Neither extreme is likely but it does suggest that Gold may be bottoming while Crude Oil is just taking a breather before another leg lower.

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