Best Way To Play The Gold/Oil Price Delta
Best Way To Play The Gold/Oil Price Delta
What is best way to play the Gold/Oil Price delta? With that ratio hanging around historic levels of 40-45, it seems the odds are good that it will come down. What is best way to play that without using futures (short gold/buy oil) ?
Re: Best Way To Play The Gold/Oil Price Delta
I don't see gold prices coming down, primarily because inflation is on the way. IMO the best move is to buy stock in upstream companies that have a lot of proven oil reserves. CLR and EOG have a lot of oil reserves and none of it is hedged, so they have the most near-term upside. Read our updated profiles under the Sweet 16 Tab.
Gold consolidating at USD1,800 by MarketPulse (Craig Erlam)Commodities1 hour ago (Nov 25, 2020 10:00AM ET)
Gold prices are a little flat today but the yellow metal continues to hover around USD1,800 support having only broken below USD1,850 a couple of days ago. It’s been at risk of such a correction ever since it plunged on the Pfizer (NYSE:PFE) vaccine news and the announcements from Moderna (NASDAQ:MRNA) and AstraZeneca (NASDAQ:AZN) since then have only piled further pressure on it.
We may be seeing the re-establishment of gold as a safe haven, with the correlation with stock markets now well and truly broken. A steepening yield curve is the main culprit despite the dollar not performing particularly well. That may make life challenging in the short-term for gold, depending on how the Fed responds.
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The historical relationship is for an ounce of gold to buy 20 to 30 barrels of oil, so with gold at $1,800/ounce crude oil should be over $60/bbl. This is one of the reasons that I often say the "Right Price" for oil is approximately $65/bbl, which is where it was trading in early January prior to entering "Crazy Corona Virus World". The ratio also tells us that if the global economy rebounds when we return to "Something Like Normal World" and OECD crude oil inventories drop below 30 days, we could see $90/bbl of oil ($1,800 / $90 = 20 bbls). Raymond James current oil price forecast is WTI averaging $70/bbl in Q4 2021.
Gold consolidating at USD1,800 by MarketPulse (Craig Erlam)Commodities1 hour ago (Nov 25, 2020 10:00AM ET)
Gold prices are a little flat today but the yellow metal continues to hover around USD1,800 support having only broken below USD1,850 a couple of days ago. It’s been at risk of such a correction ever since it plunged on the Pfizer (NYSE:PFE) vaccine news and the announcements from Moderna (NASDAQ:MRNA) and AstraZeneca (NASDAQ:AZN) since then have only piled further pressure on it.
We may be seeing the re-establishment of gold as a safe haven, with the correlation with stock markets now well and truly broken. A steepening yield curve is the main culprit despite the dollar not performing particularly well. That may make life challenging in the short-term for gold, depending on how the Fed responds.
---------------------------
The historical relationship is for an ounce of gold to buy 20 to 30 barrels of oil, so with gold at $1,800/ounce crude oil should be over $60/bbl. This is one of the reasons that I often say the "Right Price" for oil is approximately $65/bbl, which is where it was trading in early January prior to entering "Crazy Corona Virus World". The ratio also tells us that if the global economy rebounds when we return to "Something Like Normal World" and OECD crude oil inventories drop below 30 days, we could see $90/bbl of oil ($1,800 / $90 = 20 bbls). Raymond James current oil price forecast is WTI averaging $70/bbl in Q4 2021.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Best Way To Play The Gold/Oil Price Delta
If you like companies that pay a variable dividend that goes up and down primarily with the price of oil, take a look at:
Brigham Minerals (MNRL) and Viper Energy Partners LP (VNOM). They are C-Corps that pay a nice quarterly dividend and they pay out a high percentage of their operating cash flow each quarter. Their revenues are primarily from the sale of oil.
Brigham Minerals (MNRL) and Viper Energy Partners LP (VNOM). They are C-Corps that pay a nice quarterly dividend and they pay out a high percentage of their operating cash flow each quarter. Their revenues are primarily from the sale of oil.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group