Is gold a better investment than property?

In 1970, the price of gold is US$34.94 per ounce. Today it is around US$1120 per ounce. This is a 32 times increase since 1970. Imagine you had bought a house in Henry Park , a good district 10 area in Singapore for S$70,000 . Today it is selling for S$1.2 million . You think it is a fantastic investment seeing the price goes up from $70,000 to $1.2 million. In 1970, one US dollar buys $3.06 Singapore dollars. Gold price of US$34.94 is therefore S$107. Today the US dollar is 1.40 and one ounce of gold cost S$1,568.

$70,000 divide by $107 gives 2,222 ounces of gold and this is the amount of gold we get in 1970 for S$70,000. Today S$1.2 million divide by $1,568 gives us 2,987 ounces of gold. This is a miserable 34.4% increase after almost 40 years! That is very poor 0.74% per annum increase over a period of 40 years. Thus while in Singapore dollars, we see a decent 7.36% increase per annum , when we look at the price in terms of gold, we see a miserly 0.74% annual increase. THIS MEANS THAT THE SINGAPORE DOLLAR HAS DEVALUED SIGNIFICANTLY OVER THE PAST 40 YEARS!

Singaporeans who are estatic about their properties and the gains they make should recalculate their value in terms of gold. Gold it seems is a very good long term investment. If we use to buy gold with the $70,000 in 1970, we will have 2,222 ounces. Selling the gold at S$1,568 per ounce will get us S$3,484,096. If instead of buying the terrace house at Henry Park, and had he invested in gold, he would reap earn a huge S$3,414,096 in capital gains. Of course during the period the house could be rented but still the rent would not cover the difference of S$2,284,096.

If gold touches US$2,000 per ounce, or S$2,800, then S$1,200,000 will buy even less gold or a mere 428 ounce. If we sell the house for S$1.2 millon, it means we will in fact be taking a hefty 80% hair cut from our investment in terms of gold. There is a psychological factor here. Few people had invested in gold but most adults would have at some point in their life ad bought or considered buying properties. Today that same house in Henry Park that sells for S$1.2m cannot possibly be sold for S$3.4 million. If we ask S$3.4 million for a 2,000 sq ft terrace house, we will be laughed as mad or totally unrealistic in our expectations. There is less resistance to buying gold at US$2000 per ounce as compared to buying that house for $3.4 million.

Gold mania is far more possible than property mania. Foreign investors cannot buy landed property while there is no restriction for anyone buying gold! Therefore as an investor now perhaps is a good time to invest in gold.