Now with One ounce of Gold one can buy 83 barrels of Crude Oil. Gold-Oil Ratio is at the historical peak as the FED keep their money printing to stimulate the economy.
The reason behind such a huge Gold/Oil ratio is predominantly due to plummeting oil prices and whereas Gold prices inching upwards faster.
Historically over the past 25 years, the ratio between gold and oil has averaged 15.8. That means that a troy ounce of gold was worth on average the same as 15.8 barrels of U.S. crude oil. However, a current spike in the gold-oil ratio at historical levels is alarming.
The previous highest value of the gold-oil ratio was a giant 47.6 in 2016 when oil prices were slumping due to China’s economic slowdown, while gold prices remained firm.
And we know that such historical gold-ratio levels are highly unsustainable either Crude Oil is underpriced or Gold is extremely overpriced.
Oil slumped further on Tuesday as historic production cuts that OPEC agreed to over the weekend were overshadowed by the coronavirus pandemic’s impact on global demand.