Like gold, real estate represents tangible value. Many Americans own their homes and, over time, have built equity. Gold has also served as a store of value for centuries. Longer-term comparisons between the two asset classes are impossible, however, because gold remains virtually indestructible for several millennia, while buildings often do not survive a single century.
Discussed here is how these two tangible forms of property have paced relative to one another in recent history.
During this century, average annual real estate appreciation, or housing inflation, has been approximately 5% plus or minus across the United States. According to the Federal Housing Finance Agency (FHFA), appreciation has trended slightly lower, while the S&P Case-Shiller National House Price Index has shown somewhat higher results. These measures differ from median sale prices, which also reflect increases in home size and upgrades.
For context, certain raw materials have posted similar gains. Lumber prices have increased at an average annual rate of roughly 5.4%, while crude oil has averaged approximately 4.6%. By comparison, Monex spot gold prices, which track the New York and London bullion markets, have averaged close to 10% annually over the same period.
When comparing investment returns between real estate and gold, investors should also consider asset carry costs. The ‘Carry Cost’ refers to the expenses associated with holding an asset over time.
For real estate, these costs include property taxes, maintenance, and insurance. For physical gold, carry costs are generally limited to storage and insurance. Some investors store gold at home, which may seem cost-free, but the owner remains liable for risk of loss, albeit the chances of loss are slim.
While real estate leasing is widely understood, gold leasing is primarily an institutional practice used by banks, refiners, and large market participants. In these arrangements, physical gold is temporarily lent in exchange for a modest return, often to support market liquidity or industrial demand.
Investors can be exposed to owning both real estate and gold while generating income through leasing. In each case, the investor temporarily relinquishes possession in exchange for revenue, with the expectation that they will reacquire the asset at the end of an agreed upon term.
Real estate leasing and gold leasing can provide professionals a means to generate income from tangible assets, but both introduce counterparty risk. Turning possession over to a third party always carries the possibility of default, mismanagement, or delayed return of the asset.
Although gold’s annual rate of appreciation this century has been about double that of real estate, there is no guarantee this trend will persist. The current perception of the United States’ fiscal mismanagement, the democratic expansion of communism and socialism across the U.S., geopolitical uncertainty and increased awareness of the benefits of precious metals investing have created greater demand for gold bullion ownership – among private investors, institutions and central banks. Furthermore, there are few, if any, logical arguments suggesting this direction will change in the foreseeable future, which favors gold ownership.
With gold prices continuing to rise, now is the time to speak with a Monex account representative about physical gold ownership.
Disclaimer: This article is for informational purposes only and does not constitute investment, legal, or financial advice. Market observations are presented for educational context and should not be interpreted as recommendations.
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