My friend R. David Ranson of H.C. Wainwright & Co. Economics Inc. published a paper for subscribers titled, "Allocating Between Oil And Gold: A Simple Trading Rule" on August 18, 2006. It is copy righted so I can't reproduce any part of it without prior permission which I don't have time to ask for right now. However, I'm sure David would provide copies to interested readers as they frequently offer free trials of their publication. Hit the link above to visit their website.
David has noted a strong mean reverting relationship between the price of oil when it is quoted in terms of precious metals. If you were to go long oil when it is cheap in terms of Wainwright's Precious Metals Index and go long gold when oil is expensive in the same terms, over the last 20 years you could have earned an annual return of 16.0% and if you had shorted the gold and oil respectively during the same periods you could have added another 8.1% per year to the returns. This is multiples of the return available from investing in oil or gold alone. It sounds attractive to me.
