Listen, Gold Is Calling You

Stocks tumble as oil prices surge; Dow falls 205- AP

Fed: High Energy, Food Prices Keep Economy Weak- AP

Oil Jumps $5 on Dollar, Energy Department Report- AP

Home Price Drop Means $4 Trillion in Lost Capital- Reuters

Fed Beige Book: Some Higher Costs Passed On- Reuters

U.S. Corn Soars to Record as Crop Flooded- Reuters

Citi, Merrill, UBS Face Credit Loss
http://www.freemarketnews.com/WorldNews.asp?nid=57887

Everyday, countless headlines tell the fundamental reasons EVERYONE should own Gold and Silver. Still, many investors remain unconvinced. Their faith misplaced in the "words" of their Government when it is their "government" that is behind all these headlines. Government lies; what about those weapons of mass destruction in Iraq? Government deceit; what about the containment of that sub-prime mortgage meltdown? Government currency debasement; what "strong Dollar"? Government theft; how much Gold does the Treasury have left? Government destruction of the US Constitution.

A government of the people, by the people, for the people. We elect these clowns to serve us, and yet it is we that serve them. They steal from us with their inflation. They destroy our manufacturing base with their regulations. They kill the next generation with their war. They pollute our planet with their ignorance. Gold and Silver are our best defense against the wrath these clowns have loosed upon us. Investors unite! Vote for Gold, and it's running mate Silver. Defend your wealth and your freedom from those most likely to steal both from you with their lies.

Gold is screaming at you to buy it and hang on to it with an iron fist. Rarely has Gold been a "screaming buy", and today it is a SCREAMING BUY. In the past 35 years Gold has been a "screaming buy" only once before, and that was just three years ago.

Who says Gold is a "screaming buy"? Nobody. What? That's right, NOBODY. Hey, would you believe anybody if they told you today that Gold was a "screaming buy"? Probably not. I understand. But what if Oil told you Gold was a "screaming buy". What? Hey, Oil is up 172% since January 2007, it must know something. I'm listening, and so should you be.

The Gold to Oil Ratio

The Gold/Oil ratio expresses the interrelationship between the commodity that has been the ultimate form of money for six thousand years of human history and the commodity that forms the foundation of our entire global economy.

The gold/oil ratio is an important measure because it expresses the entire complex interrelationship between the king of commodities and the only timeless real money in a single data series. This ratio allows us to discern when gold or oil prices are probably out of whack and hence a mean reversion is highly likely. If we can figure out which component of this ratio is most likely to lead this mean reversion, gold or oil, then we can position trades to ride the move.

The Gold/Oil ratio chart basically illustrates how many barrels of oils it takes to buy an ounce of Gold. When one looks at this chart one notices a rather interesting relationship that can be summarised as follows.

When the Gold/Oil Ratio drops to 8 or below then it pays to get out of oil and buy Gold. When this ratio trades above 11 the opposite is true; it’s good to jump out of gold and buy oil. This has been true since the current Secular Bull Market in Gold began when the Gold/Oil ratio fell to 8 in 2000.

In August 2005 the Gold/Oil Ratio traded to an extreme point and fell to 6.25 and the moment was ripe to go long gold and sell oil. In the months that followed, and into the Spring of 2006, Gold prices rose $310 [74%], Bond prices fell [interest rates rose], and Oil traded in a range of 25%.

In January 2007 the Gold/Oil Ratio traded to an extreme point at 12.30 and the moment was ripe to go long Oil and sell Gold. The run up in Oil that followed since has been monumental. In 18 months, from January 2007 until today, oil has risen $88 [172%]. Gold has ONLY risen 71%, and Bond prices have risen 14.5% at their recent March peaks.

We are now at another new extreme inflection point. The current Gold/Oil Ratio stands at 6.35 and thus it more then makes sense to go long Gold and get out of Oil. What this pattern is basically illustrating is that Gold is now a better investment then Oil. Gold is now due for a monumental run of it's own.

With the Gold/Oil Ratio near an all-time low and the cost of Oil near an all-time high, conditions have never been riper for a powerful mean reversion. And as tight as global Oil supply and demand fundamentals are, the only practical way this mean reversion can be executed is via a massive new Gold price upleg.

Don't listen to me. Listen to the Truth. Gold is calling....