The gold:oil ratio, or the “price of oil in gold,” is one of the best indicators of where oil prices have the potential to go. Amazingly, oil still looks pretty cheap here. People don’t realize how much the dollar’s value has declined vs. gold over time.
Even after explosive moves in oil prices this week, we are just getting back to the 2018 highs. The $150-$200/barrel range recently predicted by Pioneer Natural Resources’ CEO not only looks likely to me, but even, perhaps, sustainable over a longer period than almost anyone can imagine. In the meantime, US E&P companies remain cheap even at $80 oil.
With oil exploration in this country being suppressed this certainly makes sense. Thank you Nathan