A friend of mine ask me about the following.
Frank Holmes head of US Global Investors, was on CNBC this morning talking about the “Chindia” market and its affect on gold. He pointed out that oil and gold are generally at a 15X ratio.
Today, they are at a 10X ratio. This was certainly nice to know, but he did nothing to explain further.
So I will try to enlighten everyone about this.

Let's define a ratio of gold to oil. You take the price of gold and divide it by the price of oil. You plot it on a weekly or monthly chart and look at the trends of this ratio.
In July of 1986 the ratio was at 32.8, the peak.
In August of 2005 the ratio was 6.8. The current peak of oil prices. The average is 16 historically.
Now all that this means is that the value of gold today is less than the value of oil today compared to historical long term records. Chartist believe that all things rise and fall for whatever reasons and they play the extremes of value relative to the past.
Fundamendalists belive that the law of supply and demand determine the price and that for whatever the reasons demand drives the price up and lack of supply drives the price up.
I am in the fundamentalist camp today on oil vs gold. I believe that the industrialization of India and China unleashes so much demand for oil reserves compared to gold demand that the price for oil will continue for some time to be a higher priced comodity vs gold.
Once oil stablizes in price due to the cost effectiveness of alternative energy sources which hasn't happened yet and the developing countries realize how currencies always lose value compared to gold (inflation) and they are prosperous with excess cash they will start to pay and demand more gold. When this occurrs in time I can not predict that far in the future.
Another factor is the supply side. Oil is a depleting resource and gold is an incresing resource. Therefore over long periods of time the trend of tis ratio will favor oils value increasing relative to golds value.