Oil To Gold Ratio
Sol Palha
It is the dull man who is always sure, and the sure man who is always dull.
H. L. Mencken 1880-1956, American Editor, Author, Critic, Humorist
In early February we stated that it would be far better to buy oil then gold based on the oil to gold ratio. The risk to reward favoured investing in oil. We then published this article and as expected the single celled Gold bugs responded with fury by firing of plethora of emails stating that we had lost our minds. For the full article click on the following link Full Article
Oil was trading in the 52-54 ranges at that point in time and Gold was trading at 620. Oil gained roughly 60% in that time frame and Gold 18%; clearly oil was a better investment and those that followed our advice and purchased options on oil stocks, or on the oil index, etc locked in huge gains.
Now the ratio is moving more in favour of Gold; in February this ratio was at 12.5, today it stands at 9.00 after having dipped as low as 8.5
Ideally this ratio should dip to the 7.5 level; this can come about from several ways. One would be for the price of oil to sharply rise over the next few weeks while the price of gold pulls back slightly or the other would be for the price of Gold to pull back dramatically while the price of oil remains stable. This does not mean that investing in oil is not a good idea it just means that the advantage is now on Gold's side.
As Silver moves faster on a percentage basis than Gold, the rewards could be even larger for those who decide to invest in the white metal.
Canadian Dollar
Roughly 2 years ago when the Loonie (Canadian dollar) was trading well below the US dollar we made the bold prediction that it would one day trade on par with the US dollar. We are comforted to see that lady luck has seen fit to smile on us once again and bring this prediction to fruition. Almost 3 years ago we predicted that the Loonie would one day explode as at that time the Canadian dollar was doing virtually nothing when compared to other commodity based nations such as Australia and New Zealand. This also goes to prove our dog theory which states that every dog will eventually have its day and when it does have its day it will usually have twice as much to dine on then the others. It took time for the Canadian dollar to move but when it did it moved with a fury.
We now believe that another currency out there offers the same potential that the Canadian dollar offered for those who took our advice and bought it roughly 2 years ago.
Whenever you hear a man speak of his love for his country,
it is a sign that he expects to be paid for it.
H. L. Mencken 1880-1956, American Editor, Author, Critic, Humorist
© 2007 Sol Palha
TACTICAL INVESTOR
www.tacticalinvestor.com
info@tacticalinvestor.com
14 October 2007
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