May

13

A very easy trading system is proposed by the author of this article Louis Woodhill:

Because oil always returns to its average value of 0.0735 ounces of gold per barrel, there is an opportunity for arbitrage. The federal government has 726.6 million barrels of oil (worth about $74 billion today) and about 261 million ounces of gold (worth about $373 billion today). When oil/gold price ratio is significantly (say, 10%) above its long-term average of 0.0735, the government should sell oil and use the proceeds to buy gold. When the oil/gold price ratio is significantly (again, say, 10%) below 0.0735, it should do the reverse. Right now, with the oil/gold price ratio at 0.0715, it should be doing neither.

Who knows if he has tested it?


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3 Comments so far

  1. Igor on May 13, 2011 9:38 pm

    I have tested it, bet your farm on it!

  2. George Coyle on May 14, 2011 8:12 am

    I tested this using generic futures on Bloomberg. I assumed one would follow these instructions buying/selling the ratios of oil/gold (as described) as of the electronic close today (T) holding until tomorrow’s close (T+1). Selling oil and buying crude results in net expectations of +0.02% (pre commissions/slippage) equally weighting the gold/crude positions. Selling gold/buying crude when ratio

  3. David on May 16, 2011 11:16 am

    You might be able to get an article published in Forbes with a statement like “always returns” but that’s never going to fly with somebody who has blown out their trading account twice.

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