Relative value trading

Sometimes its interesting to look at commodity prices not in absolute terms but relative to other assets. More precisely, how gold does it take to purchase one unit of another commodity? The chart above shows the performance of gold relative to other assets for the past three months.

How to read it: looking at silver to gold, we see that gold actually strengthened against silver (i.e., previously it cost 0.1880 ounce of gold to purchase one ounce of silver, now it only costs 0.171) while it weakened against the S&P 500 (aka, $SPX , from 0.8781 to 1.1500). Other series: West Texas Intermediate oil ($WTIC) and the S&P Agricultural Index ($GKX).

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