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Sunday, June 22, 2008

How Many Barrels of Oil Will One Ounce of Gold Buy?

Crude Oil Price in Gold: This chart shows the price of oil ($WTIC), the price of gold ($GOLD) and the number of barrels of oil one ounce of gold would buy for dates between January 1990 through today.

Currently, one ounce of gold will get you 6.68 barrels of oil.

I think the chart makes it quite clear why Saudi Arabia and some others think oil is too high.

When Bill Clinton was president of the US, one ounce of gold could buy between 7 and 28 barrels of oil with the lowest ratio, 7.23 barrels of oil for one ounce of gold, occurring shortly before his last day in office.

It is interesting that during President Bush's term (following Bill Clinton) one ounce of gold bought between 6 and 16 barrels of oil with the lowest number of barrels per ounce in 2005 at 6.15. At today's record high prices for oil, we get slightly more barrels of oil (6.26 vs 6.15) for an ounce of gold!

Also of note is the 19 year support line indicates we are near an extreme level again.

Here is the same chart with the US Dollar ($USD) index added.

If the dollar has bottomed and we can make it go up again, perhaps with an energy program that does not send trillions of dollars to OPEC and higher Fed Funds rates, then US consumers could get some relief at the gas pump.

Discuss this article at our "Investing for the Long Term" facebook forum called "Energy, Oil prices, Alternative Energy, etc."

My Returns 1/1/1999 through 05/31/08

My "70:30 Explore Portfolio" was up 198.7% or 12.3% compound annual return.
  • $100,000 invested 1/1/99 became $298,674
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My "50:50 Conservative Core Portfolio" was up 72.5% or 6.0% compound annual return.
  • $100,000 invested 1/1/99 became $172,470
My "80:20 Aggressive Core Portfolio" was up 72.3% or 5.9% compound annual return.
  • $100,000 invested 1/1/99 became $172,261
VFINX (S&P500) was up 31.7% or 3.0% compound annual return.
  • $100,000 invested 1/1/99 became $131,745
Vanguard's Money Market Fund was up 38.8% or 3.5% compound annual return.
  • $100,000 invested 1/1/99 became $138,784

To find out how I've profited greatly from these difficult market conditions over the past decade, subscribe to "Kirk Lindstrom's Investment Newsletter" today!

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