The long term look clearly shows that gold is in a long term bear market with oil. We are on the verge of making an all time new low for the ratio which suggest the the bear market is still in tact.
First lets look at the daily chart to see where we are right now in the major downtrend channel. We have an obvious Double H&S top pattern that has been made over the last 2.5 years or so with the breakout from that H&S top pattern coming in April of this year.
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The weekly look is showing a down channel that has the potential to be a halfway pattern in the very big picture. You can see we are fast approaching the bottom rail where we should get some type of bounce. That bounce will tell us alot going froward as to the strength of the ratio. If we takeout the bottom rail it will be clear that the down channel is a halfway pattern in the big picture.
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The monthly looks puts all the pieces together for us and paints a picture that OIL is much stronger than gold and has been since the 1994-1999 double top.
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The major downtrend shows the 3 majors patterns that makeup this channel starting with the red triangle. The breakout of the red triangle brought a new low to the ratio and signaled a continuation of the bear market for gold against oil. After the new low was made in 2005 we had a nice rally that lasted 16 months or so before it exhausted itself before making a new high, leaving us with a lower high. That high made the head of our current H&S top. That red triangle and H&S top has formed a 7.5 year down channel within the major down channel, blue dashed lines.
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All this ratio means is that oil is going to outperform gold for awhile longer, just as it has done since the beginning of the gold bull market. At some point in time it will be golds turn to out perform oil in a major bull market but right now oil has the upper hand.
All the best…Rambus