Relationship in Gold Versus Oil

The trading relationship between oil and gold is well documented. I am betting this relationship breaks down over time (Look at my February 19th posts to understand why).

http://www.thestreet.com/story/10466537/1/when-gold-trades-at-25-times-oil.html

Traders are abuzz about a possible technical relationship between the price of gold and the price of oil.

and

According to the legend, traders should expect a shift in gold and oil prices whenever the price of gold is at least 25 times greater than the price of oil.

and

The chart shows that the price ratio of gold to oil has exceeded 25 times only seven times since 1970. Also, on those few occasions when the gold/oil ratio surpassed 25, it didn't stay there for long. Rather, something happened that quickly pulled the ratio back to normal levels.

and

Schork performed some statistical detective work on the relationship between gold and oil in his newsletter on Wednesday. According to Schork, "the relationship between gold and oil had a historical correlation of 0.2. As the commodity boom took hold over the 2003-2007 time step, their relationship strengthened with a correlation co-efficient of 0.26. Prices were especially strong in 2008, with a correlation coefficient of 0.36, almost double the historical value."

However, the strong correlation between gold and oil broke down along with the global economy last fall.