Suncor Energy Inc. T.SU

Oil is cheap compared to gold

[Torontojay]

In the 20 years from 2000 - 2019, 1 oz of gold could buy 20 barrels of oil. 

From 1946 - 2021, the average is 16.53. 

If we use any of these 2 numbers and with the recent surge in gold prices, we could see oil trade between $118 and $143 just to get back to mean reversion. 

In other words, oil is very cheap relative to gold.

[pooltec]

or maybe gold is expensive

[Torontojay]

Gold is not expensive so oil is cheap.  Gold grows with the money supply and since Covid the money printers have been running 24/7. 

[pooltec]

Also China wants real gold not paper US junk bonds and no  junk $$$$.  Russia wants gold too and the middle east and.....so on.  Wars always push gold up.

[Experienced]

Jay...interesting you bring this up. The long run average ratio of an ounce of gold to a barrel of oil is 16.  Historically the range has been between 10 and 30.  Right now it is at 27.  If we have reversion to the mean, which one will change gold or oil?  Thinking most people here are wishing that it ius a higher price for oil that will bring the ratio down. If oil were to

[Torontojay]

Hi Experienced. I'm of the opinion that gold is not at all expensive. There are plenty of reasons it could go much higher especially if the real interest rate drops in the months or years ahead.  I think there is significant margin of safety for oil to trend much higher in the years ahead. If anyone believes oil is fairly valued today, then gold is overvalued. Take your pick. 

[Experienced]

Jay....yeah I have always had trouble deciding on whether gold is cheap or not.  By and large, the demand for gold relates to it being a store of value as opposed to having any real demand for it.  Oil in some ways is the same in terms of the paper trading as this relates to the future price, interest rates and storage costs but in the final analysis, the price still depends on how much

[Experienced]

Oooopppss...lol The last part...oil would have to go up 40% and this IMO is unlikely as it would result in inflation and a decline in the stock market.

[Torontojay]

That's happened in 2008 followed by a stock market crash. Also, the mean reversion can take 5-10 years to play out. 

[Experienced]

Jay..If it takes 10 years - I could be dead by then...lol

[Marty47]

I don't know if cheap or not but bought a gold watch 14k 30 years ago and a 18k heavy italien gold chain back then gold was 280 once .... just sold it to some gold dealer jews ...... he put the cash in the machine and it took a while to go through all the 100$ bills back then I bought the watch 1500$ and the chain for 1200 $ I can tell you cheap or not I like my stack of 100$ bills lol 

[GingerEnergy111]

Maybe I have been watching too much David Webb, Catherine Fitts and my favorite Marc Faber; it would seem that the central banks have been accumulating gold.  If investment houses started increasing gold as well, the small demand we have would be suddenly increased many fold.  The gold price just went up with conviction over about the past week out of it's range, demonstrating

[Experienced]

Ginger...Great post!! In terms of the inflation numbers, Government changed the way it was calculated in 1982.  Before that, there was a "basket of goods" and they found the prices for those things in the basket and then calculated the inflation number.  This was changed to a "standard of living" approach and there was no fixed basket of goods (so the basket was a

[pooltec]

GEORGE ORWELL 1984! ALL OUR POLITICIANS READ IT WELL!

[pooltec]

If everyone bought real gold and stored it in their bank's safety deposit boxes instead of paper gold the price would be $10,000 an ounce or higher!  SO WHY ARE YOU NOT BUYING AND STORING REAL GOLD?

[GingerEnergy111]

It wouldn't be prudent to announce whether or not one is in possesion of physical gold (or silver).  Simple.

[Experienced]

Ginger...yep...  A number of years ago at our house in Arizona some friends were visiting and we went out for a hike.  Later, at the house, the lady posted pictures of our hike on Facebook.  I said to her at the time - you are letting thieves know that you are thousands of miles away - not a good thing to do!! Fortunately nothing happened to them. With all the thieves and scams

[pooltec]

Damm I wish I took my own advice.  Seems everyone is!!!! Paper gold is dying.  Price of gold says to me Dust up IS IMMINENT!!!

[Torontojay]

Great post Ginger! 

[mrbb]

u have seen nothing yet

[autofocus111]

Platinum is cheap compared to Gold too. Dieselgate drove a stake through Platinum's heart, and the EV craze pushed the stake in even further. But a few years of high Palladium prices and the fade in EV growth should lead to a recovery in Platinum. Green hydrogen (if it ever gains traction) could be a tailwind for Platinum too. https://www.bullionbypost.com/price-ratio/platinum/gold/25year/