As you may have figured out already, the price of gold bullion and crude oil are highly correlated. Over the past 60 years, one ounce of gold has on average purchased 15.2 barrels of oil. With gold trading just over $920 per ounce and crude oil trading at $135, this ratio today stands at 6.8:1 as of this writing.
Even if you're not an oil person, you know that oil is on the rise. Now, the price of oil continues to break all-time highs. While some have stated that oil may not continue to trade over $100 indefinitely (although I can't really see it going down any time soon), its unlikely to retreat much below $80 any time soon, especially when looking at the huge demand coming out of the booming Asian economies including China and India combined with supply issues.
The price of gold has not been sitting out the commodity rally either. It's up 35% in the past year. In spite of gold's recent gains, the ratio remains out of whack.
The idea here is that with oil unlikely to decline below $80 anytime soon (in fact, oil experts are calling for $140 - $150 oil by the end of this summer), the price of gold is likely to rally in the coming years - and in a big way. Historical data shows that when the ratio falls below 11 (meaning one ounce of gold will buy you 11 barrels of oil), the ratio not only will come back in line with the average, but that speculation drives the ratio above the historical average of 15.2, as has been evidenced every time that the ratio fell below 11.
One could argue that we now live in different times with the global commodity markets, and ratios such as gold-to-oil are no longer meaningful.
I disagree and am willing to bet that commodity prices are in fact highly correlated, and that historical relationships between prices are likely to remain intact for the foreseeable future.

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