Prices Measured in Gold

Suppose I bought a house for USD 100,000 on June 23rd, 2003. Gold on that date was USD 355 per ounce. So I paid 100000 / 355 = 281.69 ounces of gold for my house. This means I had a choice: I could have used my $100,000 to buy 281.69 oz of gold, or to buy the house. Or perhaps that I had to sell 281.69 oz of gold to get the money to buy the house.

Today, I might be able to sell the house for USD 200,000. But gold today has a price of about USD 1,700, so the price of the house today might be 200000 / 1700 = 117.65 oz. On paper, in USD, I have doubled my money. But that money will buy 58% less gold – and also less food, less gasoline, etc. Not a good investment

via True Prices Measured in Gold.


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