How many ounces of gold does it take to buy a house?
People save all their lives just to get a decent home for their family. Whether you’re living in a first or third-world country, a house will always be expensive and you can never own one without having serious amounts of monetary investments.
Gold investments aren’t really the best way to pay for a house. The physical commodity is usually treated as hedge to a bad economy and should only be used for emergency purposes. Take Germany for example. BullionVault mentions that the Bundesbank, Germany’s Central Bank, boosted its good reputation when it chose to keep all of its gold even at two-decade lows back in the 90s. The country looks at its gold as last resort and should it sell all of its reserves today, it would be able to support its economy for many decades.
However, if in case investors decide to sell their gold reserves for a house, there’s no one stopping them. After all, a house is a great investment that can be passed down to future generations. If historical data tells us something, it’s that gold prices can skyrocket in just a few years. In 2001, gold was merely selling at $270 per ounce. Ten years later, gold prices soared to around $1,800 per ounce. If you had gold investments back in 2001, you would’ve made a $1,530 profit from each ounce of gold investment in 2011. And if you’re living in one of the 10 U.S. cities with the cheapest home prices, about 40 ounces of gold could get you a decent home.
Today, the world is living in a time where money is being destroyed by central banks. The European Central Bank’s (ECB) current stimulus is quite scary since it follows the pattern of the U.S.’ recently-concluded Quantitative Easing (QE) that bought $80 billion worth of bonds a month. Some say that the U.S.’ QE has worked but in reality, it put America deeper into debt. It may have helped stabilized the U.S. economy in the short term but unemployment is still relatively high in America. In addition, monthly U.S. home sales continue to decline, small stores are closing, and businesses are still borrowing less.
As a result of sudden events that could negatively affect the economy such as aggressive government spending via QE, consumers are left waiting for lower house prices, which will never happen since their savings are getting worn down by currencies that lose value over time. Quantitative easing also means printing more fiat money and each time the government adds a new dollar in circulation, it decreases the value of each existing dollar. Because of this condition, perhaps it’s not such a bad idea to use gold for purchasing a new house. After all, gold, apart from its use as hedge to a bad economy, is also used to preserve wealth. If you’re thinking about purchasing a house in the future, perhaps making gold investments now, no matter how little, can help in the long run.
2 Responses
Interesting perspective on gold vs real estate. I wonder if anyone has plotted historical home prices in ounces of gold. I’d be curious to see how the bubbles in each either cancelled or reinforced each other over the past century.
Hard to imagine buying a house with something as small as 40 gold Buffalo coins. The irony is that since the face value of a Buffalo is $50 according to the US Mint you could claim to have bought a $40k house for $2k.