Current Gold:WTIC Ratio Suggests Gold Is about to Soar
The comments below are an edited and abridged synopsis of an article by Lorimer Wilson
The gold:oil (WTIC) ratio tells us how many barrels of West Texas Intermediate Crude (WTIC) are needed to buy one troy ounce of gold, serving as a price-based indicator of the relative value of these two important assets.
Traditional investing mantra tells say that gold appreciates during tumultuous economic and financial times and it did just that with the advent of Covid-19, jumping from $1,550/troy ounce (ozt) in January 2020 to $2,070/ozt (+33.5%) in August 2020 at the height of the pandemic, before declining 14% to $1,775/ozt as the third wave of infections slowly dissipated.
Conversely, a slowdown in economic activity resulting from Covid caused the price of WTIC to crater by 81.7% from $63.27 in early January 2020 to just $11.57 before rebounding by a whopping 530% to its current $72.85.
Whenever the gold:oil ratio has exceeded 30:1 (i.e., oil is cheap relative to gold), crude oil has returned 32%, on average, over the next twelve months.
Whenever the gold:oil ratio has been less than 10:1 (i.e., oil is expensive relative to gold), crude oil has lost 7%, on average, over the next twelve months.
Whenever the gold:oil ratio has been between 10 and 30, crude oil has returned 5%, on average, in the following 12 months.
Whenever there has been a major spike in crude oil prices over the past 50 years, it has been followed by a rising gold price.
If the above holds true this time around with WTIC having increased by 84% in the last 12 months alone, it strongly suggests that gold is about to soar.