The Gold-Oil ratio updated.
25 April 2021
In my posts dated 9, 10 and 15 June 2020, I stated the proposition that the gold-oil ratio will revert to its 20-year average (see chart below – in particular note the March 2020 fiasco in oil markets that caused the ratio to skyrocket). There is no question that this ratio is heading back to its long-term equilibrium level (between 12 and 15:1). Gold prices have in fact been on a stable downtrend whilst oil has been on a steady uptrend since Q1 2020.
Thus I will reiterate what I said last post: assuming a gold price in mid-2022 of $2000 and a gold:oil ratio of 14:1, Brent has the potential to rise to $142. I think I will stick to my 120 forecast as stated in my posts last year.
METALS #6 - ENERGY #12
(There's still enough time to get onboard this trade!)
Upcoming Posts (that were promised in June 2020 but I never got around to writing):
(a) An options structure to profit from a move up in the price of Platinum. Two strategies: a play on the outright price and a play on the spread versus Gold. (I still like platinum over gold and palladium.)
(b) Long term options structure to profit from a move to over 100 dollars in Brent by mid-2022. based on the mean-reversion of the gold-oil ratio.