Gold and Crude ratio Calculation. All the figures are assumed.?

Question

Hi all. The current ratio of gold/crude is lets 7.307 ($950/$130). Now if my target ratio is 7.75 and that is achieved, I expect to make the same amount of profit if I am buying gold and selling crude oil irrespective of actual price when the ratio of 7.75 is achieved. But I am actually getting two different pay offs or returns. $1 movement in Gold = $100 and $1 movement in crude oil = $1000. Now keeping the value of crude oil constant at $130 the value of gold at a ratio of 7.75 would be $1007.5 (130*7.75). That would give $57.5*100=$5750 as my pay off. Now if I keep Gold as constant and calculate 7.75 ratio (950/7.75) = $122.580. Now as $1 of crude oil = $1000 I would get $7420 as my pay off (130-122.580 = 7.42, 7.42*1000= 7420). Can you piont out where I am going wrong or the logic behind it.

Answer 1

You have a very good calculation and you seem to  be right. Well tell me friend what are you looking to prove.

Answer 2

you are doing good number calculations..... please do send me your calculations to my mail. It will be very helpful for me to have a look at it and gain more maths... about the gold and crude

[e-mail]

Answer 3

:) good brain.....

But it will not hold good in all situations. Social and economic factors do have an impact and this can lead to some variations.

Answer 4

Have you got all the empirical data for your ratios? What does that suggest for the future?

I am not sure I am on your wavelength but the ratio over the last two months varies between 7.588 and 6.38 but the two prices don't always move the same way.

Answer 5

the number is correct.