Thursday, August 4, 2011

Case-Shiller in Gold

So what happens when you put together one of the most beloved assets and one of the most maligned? I pulled the Case-Shiller Q1 US Composite (since 1987, first year available), and compared it to the average gold price in USD/oz from the World Gold Council (and eyeballed $1,500 for YTD). The chart shows Case-Shiller divided by 1 oz of gold in USD.

On a relative basis, housing in gold was most expensive in 2000. By 2005-06, the peak of the housing boom, gold prices have already appreciate substantially. The mean, median and harmonic mean for the period are 24.6%, 20.8%, and 20.9% respectively.

Based on the most recent Q1 C-S read, and $1,500 average gold for 2011, we are at 8%, the lowest value for the last 25 or so years.

More importantly, what are the implications? I wish I knew for sure but it appears to me that housing, in certain areas, might have gotten "de-risked" enough (read, cheap) where it is a better relative value vs. gold, which has been both unstoppable and a very one-sided trade for a long time.

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