Gold Better Investment than Oil

Gold  Better Investment than Oil
We have heard a lot about oil prices flirting with new highs of $ 55/barrel and the price increases, respectively, at the gas pump. We heard that the dollar will weaken, making travel to Europe more expensive. But you hear very little about the precious metals used in real money: gold, as most people do not realize that these three investments in a thousand. To understand one, you need to know the others here, I analyze the situation of oil and gold. A good background on the history of gold at the KitcoCasey Morgan Poliquin. Both products have a special position with respect to the dollar. For most of our history, the value of the dollar, which has been designated by the government's intention to buy gold at a fixed price. Most investors are interested in the sources to know that the dollar was backed by physical gold reserves until 1971 that gold was in control during this period - the period known as the gold standard. When gold was removed as a backup for the dollar. However, increased over the past ten years, spiking bubble in 1980, from $ 800 per ounce. Some information about gold, about 2,500 tons of metal that was dug in 2004 with a market value of $ 35B, unlike oil, which will put the body when consumed most of the gold mine had been. still around in one form or another - an inventory of 120,000 tons worth $ 1.6 trillion Day (to 32.15 thousand ounces troy / ton) is added to cause as little fluctuation in the amount of gold in existence for a good level for the metal. The oil has a history that is similar in dollar value, so that it is sometimes called "black gold", because oil is traded internationally for a dollar, you could argue that the oil is. definers of the value of the dollar. Oil is, after all - the largest traded commodity used worldwide annual 30 billion barrels of oil cost about $ 50 for each year of $ 1.5 trillion market. The war in Iraq has affected prices and concerns about the limitations of the new supply will be discussed. The United States imports 75% of oil, I have only 2% of world reserves, while 25% of world output growth in demand in Asia has stimulated the overall consumption of the world, even if the fields are being depleted. China's oil imports grew by 35% in the Middle East is owned 65% of the world's reserves and political problems in this area and in other oil-producing regions like Nigeria and Venezuela are as bad as ever state. All this combined to drive oil prices to record audio. The chart below shows the price of oil has now broken the old record on top of the 1980 $ 55 / barrel. Pre - 1973 constant prices, reflects the time when the price is determined by long-term contracts - a squint at the golden point 1970, which shows that this is not a freely traded price. The volatility in the short-term forces, even after the dollar off the gold standard goods. I have overlap calculation shows the historical oil prices in dollars of today - the real prices of oil. I used the change in the PPI for finished goods prices, and the back. We pay $ 70 U.S. dollars in the currency of the company that is equal to the price of crude oil at $ 40 in 1980, when we look at oil prices in real terms after inflation is removed, it would be. surprising that this is a good oil to lower prices when the inflation of the dollar is a factor that my interpretation is not as high as it is. Became the basis of the decision is more severe than they were in 1980, I think oil will head higher over the next decade.

    Thus, a long-term investment better than oil or gold. To get an opinion on this, I have the price of each in the table below. Crude oil is the right size and color on the left. You can see immediately that oil is rising in advance of gold over the past four years, even as gold rose. There are some points of interest along the way it is. Overall, we see a similar pattern for both prices. This is not surprising that a movement is driven not by fundamental changes in oil and gold. But the change in the fundamental value of the dollar. There are, of course, the impact of our separation - particularly for the oil spike was short, for Desert Storm in 1990 - but overall, they were less of a factor for the long term. Gold is moving to the closing low of $ 256/oz in 2001 to $ 430 in early 2005, but oil prices must go on.

    To look closely at the oil relative to gold, I calculated the ratio of gold to oil in the table below. I used to draw a straight line to the average ratio of about 15 points just a couple of things to learn here. First, when gold was de - linked from the dollar into gold in front of the oil. In fact, one could say that is tied to oil that has kept the dollar's value is high.

    Even gold is increased to obtain more oil. The main conclusion is that gold is cheap compared to the lowest level in history. My interpretation is that gold may increase more oil to return to more normal rates of 15, if that happens, gold is up to 15 times the recent oil price of $ 54 million or $ 800 / oz. There are many drivers of these two political and financial, so I have to be careful that the ratio alone is only part of the story. The historical information presented here is not recommended. But the gold that might be a better investment than oil in the future. As you can see, in my opinion, I also believe that the oil still has many opportunities to increase the price in dollars. After driving both of these may be the growth of inflation pressure on the dollar. As Doug Casey has said that the dollar will eventually reach its intrinsic value, and both gold and oil will measure progress along the road to that end. And 'true depends on all of us to decide our own and to include much more than this report. But I hope that the gold is near record low against the oil is one of the more light that will help them understand us. Financial situation.