Would a Housing Crash Depress Gold?
posted Apr 5, 2005 at 12:09AM
Up to now I have been of the mind that a housing crash in the US would be deflationary and bad for gold prices. The rationale being increased purchasing power and decreased demand for raw materials (thus effecting the CRB)
To me gold and housing have been benificiaries of the same post-bubble environment, i.e. cheap money and easy credit.
However reading an excellent article titled Seconds Anyone has made me wonder.
If you look at some of the charts you will see in the past, particularly the late 70's that crashing housing prices coincided with the biggest gains ever for gold.
I will need to study the article in greater detail to try to understand the "mechanics" but the lesson here is to keep your eye on the gold charts themselves, and not be too duely influenced by what housing does.
The chart below show that year to date gold has been underperforming housing. Obviously one wants to be on the look out for any potential changes in trend.