A few days ago I read the article An Ounce of Gold or an Acre of Land? This sparked some thoughts about the benefits of investing in land vs buying gold.
I explained 3 benefits of investing in land instead of gold in another article. They are:
- You can live off your land, grow food, hunt, build a cabin.
- You have tax benefits as gold is considered a collectible by the IRS.
- You can easily buy land in your IRA and gain tax-free profits.
The idea that an ounce of gold costs the same or even more than an acre of land is certainly intriguing. As of this writing (August 4, 2011) gold is at an all time high at $1,681 per ounce. That’s certainly higher than recreational land which goes for $1,200 per acre in South East Ohio.
From a frugal investment perspective you should never buy at the height of the market. Gold has been on an upswing for a while and even if “experts” predict that gold can go above $2,000 it is a risky decision to buy when everyone else jumps in the game.
This chart shows the consistent increase of the value of gold over the past 5 years.
gold price charts provided by goldprice.org
Land and real estate on the other hand are currently relatively cheap, not considering the farm land bubble caused by Ethanol subsidies. Unlike the housing bubble that burst a couple of years ago, land was much less affected by the real estate boom. Still, land values have dropped a bit over the past few years. Which means you can buy land at the bottom of the cycle, while gold is near the top. Not a smart investment decision.
Another argument against investing in gold is the risk that comes with gold ownership being strictly regulated by the US government. It is well known that in the 1930′s President Roosevelt confiscated all gold in America. Private ownership of gold was dis-allowed for decades. There is a small chance that the government could resort to these measures again, if the economy collapses.
Private land ownership on the other hand won’t be threatened by the government for a number of reasons. For one, private land owners pay property taxes, so it is an important source of revenue for the government. Confiscating private land and real estate on a large basis is virtually impossible in a free republic like the US.
The end of private land ownership would mean the end of this great country and capitalism.