Housing Market Shows How Gold Maintains Its Value As Purchasing Power Drops - Goldmoney
(Kitco News) - Soaring housing prices in all the major markets do not reflect a problem within the housing market but demonstrates a problem with global currencies, according to one gold bullion investment firm.
In 2017 Canada saw the fast rise in housing prices in the world. According to research from Goldmoney, Canadian homes, priced in Canadian dollars have risen 350% since 1990. However, home prices, measured in gold ounces has been relatively unchanged for the last few years.
While many economists have attributed higher Canadian home prices to growing demand, mainly from foreign investors, Wieler said that he sees the higher prices as a symptom of devalued fiat currencies.
“In other words, the Canadian dollar lost its purchasing power dramatically, while gold prices fluctuate and remain in line with real assets,” said Stefan Wieler, director and lead researcher at the investment firm in a recent email comment to Kitco News.
“But’s it’s not just Canada, you can see the same trend in all the major housing markets in New York, Los Angeles, Paris, Geneva, Shanghai,” he said in a telephone interview. “One thing all these places have in common is unhinged central bank monetary policy.”
While gold can be volatile over the short-term, Wieler said that the research shows that the yellow metal does a better job of holding value over the long-term, compared to fiat currencies. He added that the housing data shows that gold remains the ultimate global currency.
In the global marketplace, gold has seen significant gains against the U.S. dollar. June Comex gold futures last traded at $1,340 an ounce, up 2.6% since the start of the year. Meanwhile, the U.S. dollar has dropped 2.5% against a basket of global currencies year-to-date.
While there continues to be underlying support to bring back a global gold standard to support devalued currencies, Wieler said that developing technology has made the issue a mute topic. With companies like Goldmoney, he explained that consumers can take direct control of their purchasing power.
“Because of technology, you can do everything with gold that you can do with fiat currencies,” he said. “In particular, with our platform, if you are a merchant, you can receive gold as a form of payment and companies can even pay their employees in gold.”
Looking ahead, Wieler added that he expects more consumers and business to turn to gold as a global currency as the world deals with the impact of global devalued currencies.
While housing prices have remained relatively stable in gold ounces, Wieler warned that like all markets, there is a risk that prices drop. He noted that the housing market faces strong headwinds as few consumers buy homes.
“While home prices in gold have remained relatively unchanged, we have seen a decline in wages in gold and that will weigh on the housing market and the general economy.