US Housing in Gold: 1 Comex Bar Only

By: Adrian Ash | Tue, Jul 26, 2011
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Inflationary or deflationary depression, it's like the long boom of affordable mortgages never happened...

So is the U.S. housing market nearing its low? Priced against gold it just might be.

Falling hard as the gold price doubled and more since 2006, the average US home is now priced at 103 ounces of gold - little more than one gold bar for settlement of a 100-ounce Comex gold futures contract.

Housing has only been cheaper in 26 of the last 121 years, and is currently priced around half the long-run average of 201 ounces. But might there be further to go?

Average US Home Price in Gold Ounces

Unlike the fine content of a gold bar, necklace or tooth filling, no two residential properties are ever quite the same. Buying or selling the average home can only ever be notional, most especially in a nation of 313 million people, spread out between the shining seas.

But you get the idea, no doubt, as well as the point made on our chart above. Since the housing bust began, the average US home has lost over 70% of its value in gold. It's dropped nearly 80% since the gold-market found its own floor back in 2001.

All told, swapping gold bars for bricks - whether as investment or a place to live - hasn't looked this attractive since the inflationary depression of 1981. US housing's previous low came during the deflation of the Great Depression. Never mind that the average US home doubled in size inbetween, or swelled another 40% since. Because whichever flavor of depression we've got today, the immutable object of unchanging, unencumbered gold has once more whipped back to its pre-20th century value against the ever-changing, credit-reliant market of residential housing.

It's almost as if the "long boom" of easy credit never happened. At bottom, the average US home cost the equivalent of 71.5 ounces of gold in 1934. Forty-six years later, it fell below 77 ounces of gold. Today's price tag of one Comex gold bar isn't rock-bottom yet. But compared to the top of a decade ago, it's getting there.

 


 

Adrian Ash

Author: Adrian Ash

Adrian Ash
BullionVault.com

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK's leading financial advisory for private investors, Adrian Ash is the head of research at BullionVault, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

About BullionVault

BullionVault is the secure, low-cost gold and silver exchange for private investors. It enables you to buy and sell professional-grade bullion at live prices online, storing your physical property in market-accredited, non-bank vaults in London, New York and Zurich.

By February 2011, less than six years after launch, more than 21,000 people from 97 countries used BullionVault, owning well over 21 tonnes of physical gold (US$940m) and 140 tonnes of physical silver (US$129m) as their outright property. There is no minimum investment and users can deal as little as one gram at a time. Each user's unique holding is proven, each day, by the public reconciliation of client property with formal bullion-market bar lists.

BullionVault is a full member of professional trade body the London Bullion Market Association (LBMA). Its innovative online platform was recognized in 2009 by the UK's prestigious Queen's Awards for Enterprise. In June 2010, the gold industry's key market-development body the World Gold Council (www.gold.org) joined with the internet and technology fund Augmentum Capital, which is backed by the London listed Rothschild Investment Trust (RIT Capital Partners), in making an $18.8 million (£12.5m) investment in the business.

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Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events - and must be verified elsewhere - should you choose to act on it.

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