Commodity Imbalance Situation?
I have been following various commodity ratios to find potential imbalances. The three ratios that I have
recently studied are: Gold/oil, oil/natgas, and gold/natgas.
I went back 20 years to find extremes on all of these. The highs and lows are as follows;
Gold/Oil (6.2 low to 28 hi)
2yr. avg. = 15.7
current value 16.4, +5% above
Oil/NatGas (2.6 to 25.7)
2 yr. avg. = 15.3
current value 21.6, +41% above
Gold/NatGas (27 to 370)
2 yr. avg. = 234
current value = 366, +56% above
Looking at each individually, gold appears to be in a bubble-like moon shot, oil is holding steady,
and Nat Gas is falling. Logically, either Natural Gas is way undervalued here, or the other two,
oil, and gold, are way overvalued.
In order to correct back towards the mean, NatGas will need to at least hold it's own- while the other two fall hard,
OR Nat Gas will need to rally hard, while the other two hold steady.
Given that Nat Gas is showing no signs of a rally,
I would put the best odds on the first scenario.
TW |
