Monday, August 11, 2008

CRUDE AND GOLD PRICE MOVEMENTS IN FUTURE

A recent study in the investment options for the fund managers and big investors has drawn my attention, it seems to be interesting, and so I thought why not to share this with my readers. We generally think when the stock market takes a south bound bend or plunges, showing the bear phase is out to take over, then the price of precious metal Gold go high. Gold has always been considered as a safe haven for investors to park their funds till the fresh opportunity emerges, so was the dollar earlier. With US economy under pressure and recession looming large, the dollars have lost much of its sheen. The investors and fund managers finding the unstable stock market in the emerging economy and US federal rate not being attractive, switched over to commodity market and speculating on crude. This led the world wide inflation and partially caused the food crisis too, these all issues have been discussed earlier on many of my articles. The current article is to focus on a new area of market analysis. That is the long term relation between crude and gold or liquid gold and gold. Presuming the barter system, if you look at the very long term chart; average number of barrels of crude required to buy one ounce of gold use to be around 14.5; with crude price soaring high and the gold following the suit it has changed. In fact touching the new high of $153 per barrel, now it is hovering around $125 per barrel, now considering the current gold price, a ounce of gold is sold for 7.3 barrels of crude. In fact the gold price has not moved in tandem with the crude price for last decade. It is still trading around $910 per ounce, what was $850 during 1980s, when the crude price was around $38 per barrel.
It is clear how gold is likely to appreciate in long term just getting back to its long term trading ration with crude i.e.14.5. It is all the way set to reach $1700 per ounce in future. Is not this is an opportunity, for any one sitting with money for long term investment , say for another decade or 10 years. When the gold price goes up, it goes up globally. All can reap benefit investing in gold now, it seems.














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