If you thought 2025 has been wild for commodities, the numbers tell it all: oil prices are on track to post their second-worst year relative to gold in history — only behind the 2008 financial crisis.
So far this year, the oil-to-gold ratio has plummeted nearly 50%, marking a rare divergence where crude oil prices have collapsed while gold prices have soared. The last time markets saw anything like this was during the global financial crisis. At the time, risk assets tumbled and investors stampeded into safe havens.
But here's the twist: this time it's not panic about the economy— it's geopolitics, supply dynamics and shifting global demand.
Chart: Oil-To-Gold Ratio Eyes Worst Year Since 2008
Oil Is Sliding — And It's Not Just Demand
West Texas Intermediate (WTI) crude, as tracked by the United States Oil Fund (NYSE:USO), fell to $58 per barrel this week, its lowest level since May.
That's an 18% drop year to date, driven by multiple overlapping factors — none of which are good news for oil bulls.
First, tensions between the U.S. and China are heating up again.
After Beijing rolled out new restrictions on rare earth exports, Washington responded with a threat of 100% additional tariffs on Chinese goods starting November 1. This is weighing on demand expectations and fueling risk-off flows in energy commodities.
Second, Middle East tensions have cooled after the Israel-Hamas ceasefire deal, dampening the war-risk premium that briefly lifted oil earlier this year.
And on top of that, oil inventories are building fast.
According to estimates, global visible inventories have climbed by 1.2 million barrels per day (mb/d) year to date, while OECD commercial stocks have risen by 0.2 mb/d, suggesting weakening demand and rising supply.
Goldman Sachs’ Daan Struyven expects more of the same: "We expect significant builds in November and January of OECD commercial stocks." Meanwhile, China — once the buyer of last resort for energy — is showing signs of cooling crude imports amid structural shifts to renewables, adding further pressure.
Oil-to-Gold Ratio: A Historical Anomaly?
The collapse in the oil-to-gold ratio underscores the growing disconnection between the two markets.
"15 barrels of oil bought 1 ounce of gold in June 2022. Now it takes 61," said Bank of America's chief investment strategist Michael Hartnett.
That's a fourfold swing in just over two years. Hartnett sees this not just as a chart curiosity but as a signal for policy and political trends. "Oil is relatively cheap, but we think the best Q4 bull surprise is oil cracks lower to $50/bbl," he said.
Why would a further collapse be bullish? Because it could help Trump's approval rating on inflation, boost consumer sentiment in the U.S., Europe and Japan, and even support AI-related energy demand, Hartnett argues.
He also points to potential Middle East peace deals, where OPEC nations trade supply increases for foreign capital — especially as Israeli and Saudi budget deficits hover around 5% of GDP.
What Comes Next?
The oil-gold divergence isn't just about one being strong and the other weak — it's about how differently global markets are pricing risk, inflation, and growth.
Gold – as tracked by the SPDR Gold Shares (NYSE:GLD) — is being driven by investment flows and persistent central bank demand, while oil is being dragged lower by rising inventories, soft demand and geopolitics turning less explosive.
And if this divergence deepens into year-end, it might signal something bigger: a new era of commodity decoupling.
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