Gold (GC_F, GLD) and Crude Oil (CL_F, USO) are the absolute kings of the commodity complex. And they seem to have a love hate relationship. The ratio chart below shows the large and fast spike in to the height of the financial crisis, moderated back to a steady channel for 3 years before it got a bit jiggy again, raising the channel higher for the last two years. It can also be interpreted recently as a failed break out higher on a symmetrical triangle, and now a breakdown that would target a ratio of 7. This is what makes it interesting. As it sits today it is on the precipice at the 15 mid line of the previous channel. 
A break below that has a gap to fill at 13.78 with support at 12.80 and then 10.60. There are many reasons to watch for this initial break. First, the ratio is below its 200 week Simple Moving Average (SMA) for the first time since September 2009. The Moving Average Convergence Divergence indicator (MACD) is falling and looks to head lower. The Relative Strength Index (RSI) is bearish and falling. These all point lower. The only reason to wait for a break of the 15 level at this point is that the volume this week is very large, and may end up being an exhaustion move. Only time will tell, but this looks ripe for a further decline with a print under 15 this week.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
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The Gold To Crude Oil Ratio Is On The Precipice
Published 04/17/2013, 08:50 AM
Updated 05/14/2017, 06:45 AM
The Gold To Crude Oil Ratio Is On The Precipice
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