Crude oil and gold

Crude oil and gold are both commodities that serve as beacons for hard asset investors. There’s a correlation between crude oil and gold that we should recognize. Considering both commodities have a common denominator value in U.S. dollars, that serves as a measure of inflation.

Powering Progress

The prices of oil influence the global economy.

In addition to their role as a source of energy, there are significant input costs for shipping, airlines and transportation companies.

Crude oil prices CL.1, -1.07% are revealing concerns over slow global growth and the potential for tariffs that may decrease energy demand.

Moreover, monitoring developments in the oil area can benefit investors across a broad landscape.

Crude Oil Price
Chart From Market Watch

Shine Bright Like Gold

On the other hand, gold is heading in the other direction with GC.1, -0.02%.

Since ancient times, gold has been valuable, and the price of gold was high.

Gold prices today are determined by current events, currency values, and supply demand.

The price of gold varies daily based on the market price.

Gold Chart
Chart From Market Watch

The chart indicates the ratio of the price of gold per ounce over the price of oil per barrel.

Likewise, the blue line presents gold and the orange line shows the price of crude oil.

Also, the chart is reflecting crude oil to gold within five years of range.

During 2016, oil prices fell on concerns of slowing global growth (@$33.75/bbl).

Currently, one troy ounce of gold (@$1339.80/ozt) will get you 25.8 barrels of West Texas Intermediate Crude oil (@$51.95/bbl).

Crude Oil and Gold
Chart from Macro trends

Key Takeaway:

Now, answering the main question, “Is crude oil overpriced or is gold undervalued?”

  • Gold and oil each have an inflationary relationship through commodity indices.
  • Significant movements in oil prices have the most substantial effect on gold, mainly if related to current events.
  • One troy ounce of gold will get you 25.8 barrels of West Texas Intermediate Crude oil.

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