My guess is that the ARU financial advisors were unaware of these trends:

A pickup in physical demand for gold that begins in August and lasts through the end of the year, as well as the price relationship between bullion and oil are some of the reasons Canaccord Adams strategist Nick Majendie feels gold stocks will be the best performers in the TSX for the rest of 2008.

As a result, his Canadian equity portfolio currently has a heavy 18% weighting in gold stocks. The only possible worry he has is if investors move to sell all there assets to achieve liquidity.

“Changes in rules are likely to prevent a 1987-type crash, but if it started to look anything like that experience, we would try to sell down our gold stock holdings very aggressively in that event,” Mr. Majendie said in a research note. “Obviously, the attraction of the gold group is much enhanced during periods of financial turmoil, which we expect to persist through year-end.”

In terms of the gold/oil ratio, it has moved to 7.5 times or less three times since 1970. It did so at the end of May and has remained below that level since, the strategist noted. But what is important about this trend is how well gold stocks do.

The first time the gold/oil ratio moved to 7.5 or less back in August 1976, the subsequent 12 months saw the TSX Gold Index climb 64% and gold itself gain 40%. In the same time frame beginning June 2005, 29 years later, the gold and precious metals sector surged 103%, while bullion increased 55%.

Applying those gains to the current cycle, Mr. Majendie said these 25 gold and precious metals stocks would rise 90%. And if gold itself rose as it did during those previous two periods, the implied price is US$1,330 per ounce, he added.

The ratio of gold to oil averaged 15 times during the past 38 years. And each time it fell below 10x (except once), it recovered to 15x higher in three years or less.

Jonathan Ratner