The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

How Many Ounces of Gold Does It
Take to Buy a House in Baltimore?

Posted on | August 22, 2011 | 8 Comments

Answer: Fewer today than it did yesterday!

Gold prices have been on a tear lately, topping a fresh record high above $1,900 an ounce late Monday — just two weeks after rising above $1,800. . . .
Gold prices rose 2.4% during the regular trading session to settle at $1,891.90 an ounce. In after hours electronic trading, prices topped $1,900 an ounce for the first time.

That CNN story quotes analysts worried about a “bubble,” but we’ve been hearing “gold bubble” worry-wart chatter for months and yet the price still keeps going up, up, up!

Simple question: Six months from now, will gold be more likely selling at $1,900 an ounce or $2,500 an ounce? If you think the price still has room to rise, then keep buying. Most analysts don’t see an end to the gold rush any time this year, so there’s probably still a chance to profit.

Nevertheless, if you bought gold a while back and are thinking about cashing out some of your profits, last month I told you about one Forbes writer’s idea: Sell gold, buy real estate. Adrian Ash provided this chart:

Saturday I told you that hundreds of houses in Baltimore have sold for less than $10,000 this year. Has the real estate market hit rock bottom? Probably not yet:

An ominous cloud is hanging over the housing market: Millions of distressed properties could be put up for sale at any moment, potentially adding to the glut of unsold homes that are already on the market and depressing home prices even further.

So it’s possible that housing prices will decline further, just like it’s possible that gold prices will keep rising to $2,500. Yet we seem to be approaching that market-fulcrum point when a gold-for-housing exchange will yield maximum value.

Fifteen months ago, when gold was selling for less than $1,200 an ounce, it would have taken about eight ounces of gold to buy one of those under-$10,000 Baltimore bargains. Today the price is closer to five ounces. YSHLTGB.


Category: Economics

Comments

8 Responses to “How Many Ounces of Gold Does It
Take to Buy a House in Baltimore?”

  1. Mike
    August 23rd, 2011 @ 1:57 am

    Houses in the area where I work would take pounds of gold to buy, yet there are bargains to be had even around these parts, especially if one has cash to spend.

  2. dad29
    August 23rd, 2011 @ 2:17 am

    Nobody ever mentions the bubble in Treasury bills and bonds, do they?

  3. TC_LeatherPenguin
    August 23rd, 2011 @ 2:19 am

    Stace, gold’s price ain’t no “bubble,” unless bubble is the new term for a steady ten year upward trend… http://bit.ly/oSj3mi

  4. Anonymous
    August 23rd, 2011 @ 2:45 am

    I’d not use the longevity of Gold’s rapid rise as evidence that it’s not a bubble.
    Whats smokeless powder going for nowadays?

  5. How Many Ounces of Gold Does It Take to Buy a House in Baltimore … | My Gold Fix
    August 22nd, 2011 @ 11:12 pm

    […] Continue reading here: How Many Ounces of Gold Does It Take to Buy a House in Baltimore … […]

  6. Adjoran
    August 23rd, 2011 @ 6:12 am

    Hot investments go up right up until they go down.  When something goes up very sharply, you need to make a judgment if it is an anomaly or a lasting improvement in value, because things that go up faster can come down faster.

    Another thing to remember is even if you bought gold at $1000 per ounce, you haven’t made a dime until you’ve sold it.  Should it come back to $900, no one will give you a nickel for the fact it has been to $1900 or $2500 or wherever it peaks.  In stocks, bonds, commodities, and even fine art and collectibles (as an investment), the philosophy of “buy and hold” is for suckers.  And suckers always lose.

    Never be fooled by sweet sounding touts – always do the math.  Buying at $1900 an ounce doesn’t mean you will pay that.  There are premiums to be paid and if you want physical possession, shipping and insurance.  If you don’t, there are storage fees.  And if you sell at $2500, never imagine you will receive that amount.  Premiums again, plus whatever tax rate Obama decides is “fair” for you.

    Of course, you could avoid the hucksters altogether, although I’m sure Beck and Gordon Liddy and the other spokesmodels appreciate the money you pay them indirectly for dealing with the sort of slick who sees the hayseeds coming, you could just be like Ron Paul and buy mostly mining stocks.  Gold mining companies’ stocks, if they are well run, will tend to go up and down with gold prices.  Your fee in and out will be no more than $50 total, no matter how much you buy.

    If you make investment decisions based on what you read on political blogs, it’s probably futile, but the bottom line advice is:  do the math and don’t be a sucker.

  7. TC_LeatherPenguin
    August 23rd, 2011 @ 2:25 pm

    Other than paragraph 5 (4 is dicey), you’re completely right. Yet, as an old (51–dinosaur in market years) gold bug who has went out of his way to squirrel away Maple Leafs since…when I couldn’t legally purchase Krugs, “sit and hold is the only thing holding my portfolio above the water line.

  8. Daily Pundit » Trading Gold For Real Estate? Go For It Now!
    August 23rd, 2011 @ 11:45 am

    […] How Many Ounces of Gold Does It Take to Buy a House in Baltimore? : The Other McCain Nevertheless, if you bought gold a while back and are thinking about cashing out some of your profits, last month I told you about one Forbes writer’s idea: Sell gold, buy real estate. Adrian Ash provided this chart: […]