What is the gold-to-oil ratio? Simply put, the ratio compares the price of gold to the price of crude oil. Even though the oil market is several times larger than the gold market, the gold-to-oil ratio is an important aspect of how we track current market trends and the health of the global economy. But the question is, where did this ratio start?

Twentieth Century Prices of Gold & Oil

Gold is the standard for money because, at its core, gold demonstrated what was needed for money to be: portable, durable, credible, marketable, divisible, and in low supply. Gold is the standard because nothing will ever meet the standard that gold does. Oil has been an important aspect of the global economy since the midst of the nineteenth century and Edwin Drake’s discovery in Pennsylvania in 1859. At the beginning of the twentieth century in Beaumont, Texas, the Texas oil boom began at the Spindletop oil field, further cementing the rising importance of oil to the national and global economy. However, as the global demand for oil had yet to rise significantly, the beginning of the twentieth century before World War II saw the prices of both gold and oil as relatively stable in comparison to later numbers in the decades to come.

Global Conflict Effects on Pricing

Following the end of World War II, further industrial growth between the 1940’s up and through the 1970’s caused increased demands for oil. In addition to that, the world began to see how important crude oil was to the global economy and took advantage of it. The Cold War is one of many major sites of global conflict influencing the oil industry, as well as the gold-to-oil ratio, as the Cold War began an ongoing trend of how oil is affected by geopolitical conflict. Oil was, and still is, a very important resource on the global stage, and since the beginning of the Cold War, oil has been used as a strategic resource in putting pressure against opposing sides of conflict.

In 1973, for example, OPEC put an embargo on oil against the United States for its support of Israel during the Yom Kippur War, causing the price of oil to rise dramatically in the United States. This embargo was accompanied by several other crises at the time, including a recession, a spike in unemployment, inflation, and stagnation in the economy. In turn, these all impacted the price of gold, making it more expensive, and therefore widening the gap of the gold-to-oil ratio. This oil crisis has lasted since the early seventies and into the 2000’s, which saw the increase in a need for investing in alternative energy sources, such as wind and solar power, to combat against the ongoing oil crisis.

During this time, gold became highly volatile, as an event known as the “Nixon Shock”—in which President Richard Nixon detached the American dollar from gold—created a remarkable global impact that is still felt to the modern day. Not only did this effect the American dollar, but the global market also had rush to adjust its own currency to assist in the rapid depreciation of the dollar.

The Ratio in the Modern Age

To this day, the gold-to-oil ratio remains unstable through various geopolitical conflicts and recovery efforts. With the COVID-19 pandemic, and the subsequent quarantine, the gold market crashed, leading to a global financial crisis that is still felt several years removed from the initial onset of the pandemic five years ago. However, the gold market crash has also indicted an interesting turn in events, as though gold prices were boosted to a safe haven during the pandemic and quarantine, the demand for oil and oil prices dropped dramatically.

As of January 2025, the gold-to-oil ratio is 37.91, inductive of the high price of gold to the low price of oil. This number has always been changing, and while it was more stable during the beginning of the twentieth century, the following several decades’ worth of geopolitical conflict, various recovery efforts, and other economically destabilizing events have lead to the gold-to-oil ratio being more tumultuous than it has been in the last 160 years.