The oil/gold ratio does it again!

There are many reasons to be dissatisfied with my commodities system from yesterday, but the most important one is that it does not even pretend to address the questions I had laid out for any such system when I started going on about commodities, namely how to explain the behavior of the all-knowing but utterly mysterious oil/gold ratio.

The peculiar relationship between precious metal/industrial commodity ratios, such as gold/copper and especially silver/oil, and interest rates that we mentioned yesterday has been especially difficult and irksome. To repeat, these ratios appear to have a long-term positive correlation but a negative short-term or intermediate correlation. As a proxy for gold/copper and silver/oil, I used the gold/oil ratio, simply because that is the one I have data for. Read more »

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Commodities Complex

In my last post, I said I would try to confront the problems presented by the similarities and differences between the gold/copper ratio and the silver/oil ratio, especially considering that we believed we had found an excellent way to model gold/copper, and yet silver/oil, despite its multiple similarities, never quite seemed to fit into anything. Moreover, any partial solutions that suggested themselves often seemed to violate other relationships that we had modeled and appeared more satisfactory, especially those involving the oil/copper ratio, which seems to be somewhere between the dollar/yield ratio and the yield curve spread. Read more »

Rambling interlude: Gibson’s paradox and the way to the silver/oil ratio

Yesterday we commented on what we believe is a variation of Gibson’s Paradox expressed in the formula copper/yield=gold/dollar.

These are charts from Friday. Read more »

Gibson’s Paradox + Greenspan’s Conundrum = Overstreet’s Enigma

After all of my fooling around with variations of the gold/copper ratio in my most recent posts, who would have guessed I could have missed such an important variation as this:  gold/dollar=copper/10-year yields?

Over the course of the last decade, it is not hard to imagine that with commodities breaking records to the upside and the dollar and yields hitting record lows that the gold/dollar ratio will look a lot like the copper/yield ratio or an industrial metals/yield ratio. Read more »

Modeling copper and searching for oil/gold

I have been disappointed about how far away I am from figuring out the oil/gold ratio, never mind why it has the ‘effects’ or implications that it does. Today, though, after finally pinning down the gold/copper ratio, I thought I could smell oil/gold, and I sense that it is right under my nose, but try as I can, I cannot model that ratio yet.

Before I tangle with oil/gold, though, I just wanted to nail down gold/copper, since yesterday’s post was rather confusing. Read more »

Head/heels for gold/copper

I don’t know if I’ve been this excited about market analysis since the oil/gold ratio first thwacked me square in the middle of my forehead a few years ago. Every time I seem to more or less pin down one ratio, another ratio that I thought I had more or less secured on a previous occasion begins to feel less certain. This morning, having decided to look back at some of my previous posts to see if they still made sense or were too obviously the product of writing far into the night when I should be fast asleep, I stumbled back onto the conclusion I had made about the gold/copper ratio. This ratio had been causing me trouble recently, because it seemed to be a counterpart to the silver/oil ratio which seemed to be a mirror or indicator of the short term bond yield. Read more »

Microcycles and Macrocycles

It seems odd that the oil/copper ratio should correlate or appear to correlate with the yield curve so strongly. It is not so much the fact that oil and copper would be correlated with yields in some fashion, but that the correlation doesn’t run the other way around. I would have guessed that the ‘Leeb oil shocks’ that followed on Klombies’s copper/oil extreme and brought about the collapses in the NASDAQ bubble of the late 1990s and the financial crisis of 2008 would have also been behind the negative yield curves that warned of looming recession.

But that just doesn’t seem to be the case. Read more »

Commodity ratios and yields

I’m going to try to recap yet again where speculation has brought us before engaging in yet another round. We have suggested that the oil/copper ratio has a close or perhaps leading relationship with the dollar/yield ratio and the yield curve. Finding historical charts of copper/oil and copper/silver is pretty difficult, so I’ve had to make do.

And so will you! Read more »

Oil and the Commodity Complex

Thinking about some of the problems I’ve been trying to tackle in these recent posts over the weekend, I tried to formulate a more coherent way of structuring the issues, and at first I thought I had stumbled on something new, but after having looked at the little data I can get my hands on, it appears somewhat less promising than I first thought. Nevertheless, I have decided to make use of it as a way of keeping all the moving pieces together. Read more »

Predicting Copper & the Importance of the Gold/Copper Ratio

I want to continue with the copper theme here, but let’s briefly recap where we have been over the last few days. We originally suggested a way of forecasting oil movements and prices, with Kevin Klombies’s copper/oil ratio playing the primary role. Based on this and techniques I have developed, we came to the tentative conclusion that oil would hit $150 within the next 15 months, and that this oil spike would bring a massive stock market rally to a conclusion and then provoke a resurgence in gold (which we predicted would soften until some time around the 2012 US elections). Read more »