Robert Zingale

Oil/Gold Arbitrage Opportunity

Yea I am not seeing that either. When I refer to demand and supply this can mean futures contracts as well. This can also incorporate speculation and whatever else you would like to call it. All this means is that it is not entirely monetary influenced.

As for my strategy it has worked out extremely well since I've enacted it at the start of trading of Monday. I am up 6.64% in about two days. The relationship between gold and oil has closed down to (138.75/978.700) or .141770.

What has happened is that the demand and supply portion of oil's price has fallen simultaneously with a further future dilution of the dollar created by the moral hazard of the government willingness to bail out failing companies. Their role is going to be to loan large amounts of capital to failing companies at artificially low interest rates. This further fear has supported gold's price. This is exactly what I expected to happen in my ideal situation.

The other situation that I thought would cause this ratio to come further together would be a price spiral in oil which would cause such a sudden economic downturn and further financial instability that it would continue to dilute the dollar as a result of the Fed continuing to print money in order to combat these issues. This would likely cause gold to be revalued to historical levels to oil as the dollar would weaken and demand and supply of oil would be severely comprised.

I hope someone took this position and thought my reasoning presented them with a healthy risk adjusted return during a market where that is scarce.