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Gold-oil ratio at a five-year high
22/08/2025
Does the historically high gold-oil ratio once again indicate a major macro shift?
The gold-oil ratio - how many barrels of oil one ounce of gold can buy - offers a quick read on economic health and market mood. The ratio surged to more than 50 barrels per ounce of gold in early August, far above its average of around 18x since 2000.[1] What has driven this divergence? And where is the ratio heading now? The divergence between two of the world's most important commodities reflects growing economic uncertainty. Gold tends to maintain its value during economic downturns and is seen by some as a potential safe-haven[2] asset and inflation hedge. Oil prices reflect the supply/demand balance and the risks to supply. They tend to rise when industrial production and consumption increase.
Historically, extremes in the ratio have reflected the onset of major macro shifts. When the ratio last rose above its current level, the 2020 pandemic was unfolding. Now, gold has climbed over 90% in three years to around USD 3,400 per ounce, while Brent has slid to USD 66 per barrel since the beginning of this year after hovering near USD 80 post‑pandemic. The reasons appear straightforward. Over the last three years gold has seen unprecedented central bank demand, particularly from nations like China and India seeking alternatives to U.S. Treasury holdings and de-dollarization. In addition, the perception that gold is a safe haven has led investors to flock to the metal, particularly amid concerns that the U.S. dollar may no longer offer the same diversification benefits it once did. And while inflation has eased since the pandemic, it is still elevated in the U.S., further boosting gold’s appeal as a potential hedge.
The gold-oil ratio has reached levels not seen since the pandemic
Sources: Bloomberg Finance L.P., DWS Investment GmbH as of 8/19/25
The oil price on the other hand has been a victim of basic economics: lower demand and higher supply. Global crude oil output has risen significantly, due to higher OPEC+ output.[3] Also, with its shale boom, the U.S. has become a significant player in oil production.[4]Demand concerns are adding to the bearish price sentiment. Tariff policies have significantly darkened the economic outlook for 2025.[5] Recent diplomatic efforts at ending the Russia and Ukraine conflict have also pressured prices. Successful peace talks could bring more Russian supply into play, pressuring crude prices further.
“While short-term volatility remains, we believe the structural forces driving gold and oil will gradually normalize, narrowing the current extreme in the ratio,” says Darwei Kung, Head of Commodities and Natural Resources at DWS. Markets have largely priced in OPEC+’s planned production increases, and recent tariff agreements have reduced somewhat the threat they pose to growth. In our view, it is also unlikely that gold will continue to rise sharply in the next few years. Mainly because of a declining demand on jewelry which was offset by investment demand in the past. On the other hand, considerable uncertainty remains as the imposition of higher tariffs than we expect could increase doubts about the global economy again, hitting the oil price, and potentially favoring gold.