A Significance to the Gold/Oil Ratio?

Is there a hidden connection behind the Gold to Oil ratio? Some would say yes. We have often called Gold the King of Money, while Crude Oil (sometimes called Black Gold) is clearly the King of Commodities. Many hold the view that both Gold and Oil are a direct reflection of US dollar value ; as the value of the dollar falls, so gold and oil rise. From 1999 to 2009 gold has risen from $255 to as high as $1,000 while oil has risen from $12 to its peak of $147.

In 1999 when the commodity bull market began, the ratio between the gold and oil price was 21:1 (where it would take 21 barrels of oil to buy 1 oz of gold). Does this ratio offer us an indication of something deeper, or is it simply some arbitrary variation between the King of Money and the King of Commodities?

The last several years the ratio has been reasonably stable, ranging between 8:1 to 10:1. For example, in early 2006 the bull market in commodities was now seven years old; Gold was trading at $560, Oil at $62 and the ratio 9:1.Two years later in early 2008 Gold was $835, Oil $100 and the ratio 8.5:1. At this point it could be argued that the two had risen together, each equaling reflecting a loss of value in the dollar.

However the end of 2008 shows a very different picture. Now Gold was trading at $844 but Oil was at $39.50 and the ratio all the way up to 21:1. What had changed for oil? Global demand hadn’t fallen significantly, nor had the fact changed that we are only discovering 1 barrel for every 8 we consume.
Did the ratio change signify a simple slowdown in world trade? Or could it be indicating a greater importance being placed on money, a representation of ‘value’ than on commodities, a representation of ‘things’?

Where is the ratio now? Today the ratio was 17.7:1 and trending back to its average.

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3. Gold and Gold Stocks During Periods of Deflation and Inflation
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6. Richard Russell: Six reasons to invest in gold
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