Oil prices are at a historic high relative to the Goldman Sachs non-energy commodity index, implying that crude has decoupled from other scarce and consumable necessities with listed futures.
Then there’s the oil/gold ratio, which hasn’t been this high since the summer of 2005. That was an excellent moment to buy gold, incidentally, and one when oil prices stalled for a time.
And a decent reason one might care to consider how oil trades in relation to gold is that, to a significant degree, both commodities trade like a currency called “the anti-dollar.” Despite the cries of “it’s all supply/demand” from the peak oil-believers, the negative correlation between oil and the dollar has never been steeper in 15 years than in recent months.
The fact that oil had never before been up the daily limit of $10 a barrel — and did so Friday accompanied by an analyst’s call that the price would hit $150 in a month — isn’t exactly a bell-ringer, but it does give some pause. I’d never like to shout “Qualcomm $1,000 price target” in a crowded futures pit, but the echoes are there.
The Long and Short of Bank Stocks
June 9, 2008