Is buying gold equivalent to buying a put on housing?

It is pretty obvious that our housing prices have
undergone some rather rip roaring inflation.
It seems to me that the gold/housing ratio has to
shrink. It is my understanding that one hundred
years ago, five hundred ounces of gold would
be a pretty darn good house. Today in many
areas five hundred ounces of gold would not buy
nothing, not even a shack.

Any other thoughts here?

Tom wrote:

It is pretty obvious that our housing prices have
undergone some rather rip roaring inflation.
It seems to me that the gold/housing ratio has to
shrink. It is my understanding that one hundred
years ago, five hundred ounces of gold would
be a pretty darn good house. Today in many
areas five hundred ounces of gold would not buy
nothing, not even a shack.

Any other thoughts here?

I think that 100 years ago 500 ozs of gold would buy a pretty darn good
city. ;-)

Alan
'$10,000 face'

"Alan Williams" wrote in message
...
Tom wrote:

It is pretty obvious that our housing prices have
undergone some rather rip roaring inflation.
It seems to me that the gold/housing ratio has to
shrink. It is my understanding that one hundred
years ago, five hundred ounces of gold would
be a pretty darn good house. Today in many
areas five hundred ounces of gold would not buy
nothing, not even a shack.

Any other thoughts here?

I think that 100 years ago 500 ozs of gold would buy a pretty darn good
city. ;-)

Alan
'$10,000 face'

Not sure if you are being sarcastic and I am having
trouble finding this data, but Paul Revere's house
went for $12,500 in 1906 and I cannot imagine
what silly price that would bring today.

http://www.paulreverehouse.org/membership/gazette.shtml

On 22-May-2005, "Tom" wrote:

It is pretty obvious that our housing prices have
undergone some rather rip roaring inflation.
It seems to me that the gold/housing ratio has to
shrink. It is my understanding that one hundred
years ago, five hundred ounces of gold would
be a pretty darn good house. Today in many
areas five hundred ounces of gold would not buy
nothing, not even a shack.

Any other thoughts here?


In general I don't think there is a good reason to believe that the ratio of
prices between gold and housing should remain constant over time. If
anything, I would imagine that the limited space on the planet and the trend
towards better houses (both in terms of larger houses eg 1600 sq ft 1950's
levittown ranches vs today's 3200 sq ft transitionals in the suburbs and in
terms of technology like heating, cooling, security, and a/v systems) would
increase the real price of housing in the future while better extraction
technology and eventually space mining would reduce the real price of gold
in the long run. In addition, the real price of gold received a large
downward pressure when people stopped using it for money, making comparisons
to 100 years ago difficult.

Still, who knows what trends the near future will see. My father bought a
house in 1979 for about 40 oz of gold. Today the same house would require
about 350 oz of gold to purchase. You could also quote the price of the
house in terms of 8 track tapes and question why the ratio has gone so out
of whack.

FWIW I expect more of a soft landing for housing prices in the US. Dollar
values remaining relatively constant or growing very slowly for a while
while the dollar declines in value for a total real decline in the 20 to 30
percent range over a few years. As long as gold remains constant in real
value (which more or less would be the expected case -- otherwise it's
current value should be different), this would lessen the ratio as you
indicate above.

But I'm not an expert.

Gold is, for all intents and purposes, a government-controlled
commodity. The newly mined gold and the floating supply that traders
trade is very small compared to that impounded supply controlled by
governments and central banks.

You aren't going to see a relationship between gold and current events
in the short-run, because the world's socialized nations (the
Netherlands, Italy, United Kingdom) presently see gold as a relic, a
sort of family heirloom, that they can sell from time to time to paper
over their public deficits. Under Jimmy Cooter, America even did some
of these sales.

Until some event happens that these governments feel the need to cling
to their remaining gold at all costs, the gold market will not advance
very far upwards before governmental sales depress the price.

However, this is a good thing for the individual gold accumulator.
Right now we have a chance to buy gold at the same cash prices that
existed in 1979-1980, despite all the constant inflation and mountains
of debt that have been piled up since then (i.e., the real value of
those same cash prices is much lower than it was twenty-five years
ago). Gold is a bargain now. Just don't expect much change until some
event occurs that radically alters the world's political climate or
political landscape.

Will that change in the price of gold be the result of a crash of
housing prices in the U.S.A.? Seems doubtful, unless top American
banks would come under a lot of financial pressure as a result - and
people would have to be aware of their condition (people are generally
oblivious).

Some people seem to think that gold prices will slowly go up now that
some big banks and some major gold producers have had to unwind some of
their funny/funky loans against future gold production. These had a
depressing effect on the market for a long time too. Maybe so, but I
see governmental and central bank sales as too big to ignore.

There would probably have to be some drastic change as the result of
war or terrorism before governments and central banks changed their
gold selling policies. Against that day, individuals should accumulate
gold like a form of savings or insurance. Short term speculations in
precious metals will continue to be a hard way to make money.

oly

"Tom" wrote in message
...

It seems to me that the gold/housing ratio has to
shrink. It is my understanding that one hundred
years ago, five hundred ounces of gold would
be a pretty darn good house. Today in many
areas five hundred ounces of gold would not buy
nothing, not even a shack.

In 1964, my father purchased a 2500 sq. ft, 3 bedroom suburban home
on 0.75 acres of land. In 1997, I purchased a 2850 sq. ft, 3 bedroom
suburban home on a full acre of land. In gold terms, I paid 33% more
for 33% more land and 14% more house. While there are a lot of
reasons why this is an "apple and orange" comparison, I'm not sure
the term "rip roaring inflation" is exactly justified in the long
term.

OTOH, a large U.S. budget deficit tends to both drive up the dollar
price of gold and to increase interest rates. High interest rates
tend to depress house prices, because people purchase houses based
on their monthly payment amount rather than the actual sale price.
So at least in theory, we may well see the ratio shrink.

But if you want to buy a "put" on housing, there are much more
efficient financial instruments for that purpose.

--
Michael Benveniste --
Spam and UCE professionally evaluated for $419. Use this email
address only to submit mail for evaluation.

There is an analogy often made by the sellers of gold that an ounce of gold
would buy a good suit 100 years ago, so still will today. It's irrelevant.
there is no fixed ratio of anything to anything. prices of things fluctuate
and so does the ratio of prices between commodities and between commodities
and other items.

"Tom" wrote in message
...
It is pretty obvious that our housing prices have
undergone some rather rip roaring inflation.
It seems to me that the gold/housing ratio has to
shrink. It is my understanding that one hundred
years ago, five hundred ounces of gold would
be a pretty darn good house. Today in many
areas five hundred ounces of gold would not buy
nothing, not even a shack.

Any other thoughts here?

but dont forget the main gold bug point that if you put away your $20
in paper notes 100 years ago, that today you could maybe buy the shirt
to go with the suit.

"Michael Benveniste" wrote in message
...
"Tom" wrote in message
...

It seems to me that the gold/housing ratio has to
shrink. It is my understanding that one hundred
years ago, five hundred ounces of gold would
be a pretty darn good house. Today in many
areas five hundred ounces of gold would not buy
nothing, not even a shack.

In 1964, my father purchased a 2500 sq. ft, 3 bedroom suburban home
on 0.75 acres of land. In 1997, I purchased a 2850 sq. ft, 3 bedroom
suburban home on a full acre of land. In gold terms, I paid 33% more
for 33% more land and 14% more house. While there are a lot of
reasons why this is an "apple and orange" comparison, I'm not sure
the term "rip roaring inflation" is exactly justified in the long
term.

OTOH, a large U.S. budget deficit tends to both drive up the dollar
price of gold and to increase interest rates. High interest rates
tend to depress house prices, because people purchase houses based
on their monthly payment amount rather than the actual sale price.
So at least in theory, we may well see the ratio shrink.

But if you want to buy a "put" on housing, there are much more
efficient financial instruments for that purpose.



OK, let me know the financial instruments that will
let you buy a put on this overheated housing market.
Actually gold is better than a put as there is no time
decay, and silver is probably better yet.

I have taken a look at this housing market and it has
gone completely berserk. We can argue over how
many angels are on the head of a pin, but you cannot
argue that when you have raging inflation where to put
your money. When there is raging inflation you put
your money in gold. End of discussion.

And this raging inflation in housing prices is pretty
strong evidence of a general raging inflation in the US
economy.

When the dollar is strengthening sell your gold, but I sure dont see that
now.

"Tom" wrote in message
...


snip


OK, let me know the financial instruments that will
let you buy a put on this overheated housing market.
Actually gold is better than a put as there is no time
decay, and silver is probably better yet.

I have taken a look at this housing market and it has
gone completely berserk. We can argue over how
many angels are on the head of a pin, but you cannot
argue that when you have raging inflation where to put
your money. When there is raging inflation you put
your money in gold. End of discussion.


That's just plain false. the gold bugs would have you believe that, but if
you take a look at inflation versus gold prices over the last 40 years, you
will find there is no direct correlation.

And this raging inflation in housing prices is pretty
strong evidence of a general raging inflation in the US
economy.


A lot of the price problem in housing comes from a very few areas where
demand is strong and supply is not. often supply is being artifically kept
low by misguided environmental policies and zoning rules that restrict how
much and where housing can be built. Don't blame other factors when these
are the primary factors contributing to housing price increases.

When the dollar is strengthening sell your gold, but I sure dont see that
now.