by Jeff Clark: Time
to Board the Gold Stocks Train?
have a crystal ball, but I’ll bet I can tell you how much a
house will cost in five years.
some interesting research last month on how much gold it takes to
buy the average-priced home in the U.S. I put the data to a chart,
and it’s quite revealing.
interesting is that as much as house prices have fallen and as much
as gold has risen, today’s ratio is still above the historical
average. You can see we’re at the same number today as 1970,
and yet look where it was 10 years later when gold peaked.
another interesting observation: the ratio was 100 during both high
inflation (1980) and high deflation (1930). The connection between
house prices and gold prices during economic extremes seems awfully
So, if gold
peaks and real estate bottoms in about five years, then a house
will cost you about 100 ounces of gold in 2015. Maybe it will take
ten years, but the point is, I think we can count on the ratio moving
lower this decade, and probably significantly so. Even for the modest
budget, 100 ounces almost sounds manageable.
too volatile to use as a savings vehicle? Better reconsider that
assumption, because we’re convinced a third dynamic will be
at work: a falling dollar. Ergo, you can sock away lots of cash
for your offspring, but if it’s denominated in dollars, it
won’t buy them as much as gold will. Think about it: if gold
doubles, that means your dollars will have lost a significant amount
of purchasing power.
The fine print
here, of course, is that you sell when the gold price is high, and
that you pay the tax on the sale. But I would counter that argument
by saying that gold is probably not stopping when it doubles from
right about the direction of real estate – down – and
Doug Casey is correct in his projection for the gold price, then
I think I’ve got a solid plan to buy my kids a house.
Clark is editor of Casey's
Gold & Resource Report in Casey’s Daily Dispatch.