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Gold To House Price Ratio

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HP_UK_in_gold_1930.PNG

Currently we are at [using Nationwide]:

GPB 156,000 / GBP 580 = 268

The bottom from each trough, in the 80s was 100, and in the 90s 200.

Using a bit of algebra, Even if gold prices remains the same price at GBP 580/oz, then house prices can be projected to be

- GBP 58,000 if the ratio bottoms at 100

- GBP 116,000 if the ratio bottoms at 200

and out of interest, GBP 87,000 if in between at 150.

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HP_UK_in_gold_1930.PNG

Currently we are at [using Nationwide]:

GPB 156,000 / GBP 580 = 268

The bottom from each trough, in the 80s was 100, and in the 90s 200.

Using a bit of algebra, Even if gold prices remains the same price at GBP 580/oz, then house prices can be projected to be

- GBP 58,000 if the ratio bottoms at 100

- GBP 116,000 if the ratio bottoms at 200

and out of interest, GBP 87,000 if in between at 150.

Very, very interesting. How reliable is this, given that everyone is so rude about gold? (I do have a small amount of gold, so I'm not rude about gold!)

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If the ratio doesn't work, then you haven't lost out. If one had to wait say 20 years for a bottom [that would be maddness anyway] - Gold will still be worth something as it has 5000 years track record. I cannot say what the GBP will be worth in 20 years time.

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What we do know about Mr. Redfield is that when he died in 1974, his estate was worth about $100 million, and in the basement of his modest home, behind a false wall was a hoard of over 411,000 silver dollars. Most of the silver

dollars were Morgan Dollars, and to a much lesser extent there were Peace

Dollars too. Many of them were still in their original Mint bags.

Just to give one a concept of 411,000 silver dollars; it is a weight of about

11-tons.

http://www.bellaonline.com/articles/art41895.asp

Smart money has always kept their wealth in precious metals, land or businesses/shares of businesses that are less affected by the ravages of inflation. They can say with certainty in 10-20 years time, their wealth will be preserved.

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What we do know about Mr. Redfield is that when he died in 1974, his estate was worth about $100 million, and in the basement of his modest home, behind a false wall was a hoard of over 411,000 silver dollars. Most of the silver

dollars were Morgan Dollars, and to a much lesser extent there were Peace

Dollars too. Many of them were still in their original Mint bags.

Just to give one a concept of 411,000 silver dollars; it is a weight of about

11-tons.

http://www.bellaonline.com/articles/art41895.asp

Smart money has always kept their wealth in precious metals, land or businesses/shares of businesses that are less affected by the ravages of inflation. They can say with certainty in 10-20 years time, their wealth will be preserved.

This wasn't so smart as the government would have got much of it. He should have made sure only the people who he wanted to inherit his wealth would know about his stash. In this case we would never have known about it.

As far as I am concerned this is one of the major reasons for holding real money

Added:

I had a read of the article and it looks like Mr Redfield and I had the same idea. He would have turned in his grave to know the IRS stole his stash:

Upon the death of Redfield, the IRS seized the opportunity to audit the

estate. While searching the Redfield home, the false wall was discovered

and removed. One source reports that the false wall was discovered through

a note found by an IRS agent. The note told of the hoard, and asked the

discoverer not to alert the IRS. Behind the wall was 400 bags of silver

dollars, most of which had been sitting there for decades.

Edited by dr ray

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Currently we are at [using Nationwide]:

GPB 156,000 / GBP 580 = 268

The bottom from each trough, in the 80s was 100, and in the 90s 200.

At the end of Q1 this year we were at:

150K/650 = 231

A drop of about 66% from the high of nearly 700 a few years ago.

The last time the average UK house cost 231 ounces of gold was in 1996!!

So i reckon the low we saw earlier this year was the low for this cycle in nominal terms.

Edited by Mammon

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Sorry if off topic, but will commodities in general be a better hedge in terms of long term reduction in the value of the fiat paper currency? Gold no doubt is the numero uno, but what about commodities especially with relation to dollar and sterling?

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What we do know about Mr. Redfield is that when he died in 1974, his estate was worth about $100 million, and in the basement of his modest home, behind a false wall was a hoard of over 411,000 silver dollars. Most of the silver

dollars were Morgan Dollars, and to a much lesser extent there were Peace

Dollars too. Many of them were still in their original Mint bags.

Just to give one a concept of 411,000 silver dollars; it is a weight of about

11-tons.

How did he benefit from this pile of metal?

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It was just his savings account, he didn't trust banks, you see. [No FSA insurance scheme probably] The silver kept up with inflation or kept it's purchasing power, so he didn't need an interest rate per say that we are all so used to, today.

It was also diversification, he had businesses and properties, stocks paying a passive income.

Edited by Pseudo Lord Sandwich

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Sorry if off topic, but will commodities in general be a better hedge in terms of long term reduction in the value of the fiat paper currency? Gold no doubt is the numero uno, but what about commodities especially with relation to dollar and sterling?

In the long term, commodities will at best be worth something to someone. We're still not out of the woods to a major sharp devaluation of $ or £.

Choose a historically low price commodity, e.g. Silver, there is a low risk to that sharply devaluing in comparison to £ or $ over the next few years, especially in a low base rate environment, and economic uncertainty.

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How did he benefit from this pile of metal?

He was wealthy and had many assets with different pros and cons. The benefit he got from the pile of silver is that it will never be worthless like some of his other assets. How did he benefit from his house insurance? How did he benefit from cash in the bank? Unused fuel in the car? Beans in the larder? etc.....Obviously he was a fool to leave a note for the IRS to see otherwise they would not have known.

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Sorry if off topic, but will commodities in general be a better hedge in terms of long term reduction in the value of the fiat paper currency? Gold no doubt is the numero uno, but what about commodities especially with relation to dollar and sterling?

I do not think so. Given a stagnant economy and demand destruction, the price of commodities will crash again in a deflationary environment. Though hard to believe in the recent era of super-abundance, money will be more valuable against goods as it will be scarce. However, that money is also a currency which might well devalue against stronger currencies, which could show up as a double depreciation [hyper-deflation] in assets as against a stronger currency such as gold.

Edited by roman holiday

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