In the end, I think it comes down to your expectation for the US economy and Fed policy. Everywhere you look right now, you see escalating prices. Basic economics teaches that if the central bank for a country "accommodates" a rise in prices (inflation) by expanding the money supply, then further inflation will ensue. Contrary to popular belief in the financial press, high energy prices do not act as a "tax" on the consumer if the central bank (Fed) accommodates the rise. The worst thing the Fed could have done today was not raise interest rates.
However, they're in a tight spot. With the economy most likely at a tipping point, rising rates will choke off economic growth. If the Fed has any 'Volcker' type resolve, they will allow the country to slip into recession which in the long run, will fix a lot of imbalances. But more than likely, and as evidenced by the dissenting vote today on the FOMC, they will relent and lower rates, accommodating the price increases for everything. Inflation will become entrenched and we'll be back to the late 70's before we know it.
The only bad outcome for gold at this point is that the FOMC shows some resolve, tells everyone too bad, you've had it too good for too long and continues to raise rates. Otherwise, gold has nowwhere to go but up. How much do you believe in Greenspan and company (he's no Paul Volcker).
As for gold itself, the ratio referred to is the price of gold to the XAU index. If the ratio is over 5, gold stocks are good, under 4, gold stocks become expensive. But keep in mind both sides of the ratio.
