Economic Insights: Gold Versus Farmland

January 19, 2018 04:44 PM
Economic Insights: Gold Versus Farmland

Balance has returned to the relative value of gold versus farmland. The ratio reflecting the ounces of gold required to buy an acre of Illinois or Iowa farmland has eased back to levels existing in the early 2000s, prior to the explosion in gold and then farmland prices.

Gold prices remained relatively stable at the turn of the century and then began rising, punching through $500 an ounce in 2006. Prices soared during the financial crisis of 2008 and peaked in 2011. Farmland values moved higher as well, starting in 2007, triggered by ethanol demand. Land values peaked in 2013. During that raucous ride, the ratio dipped near 3-to-1 in the case of Illinois farmland and under 3-to-1 for Iowa farmland. Then it soared near 7-to-1 as gold prices collapsed and farmland prices continued to surge.

Since then, that ratio has eased back into the 5.5- and 6-to-1 zone, an area more in line with the ratios seen in the first five years of this century.

Granted, the fundamentals for gold and commodity prices, thus farmland values, remain subdued. In addition, inflation remains tamed, even a point of concern for the Federal Reserve. But the return to a “normal” ratio suggests the economic relationship is in balance. It hints that farmland values could begin to show the slow, steady single-digit percentage increases noted in the first years of this century.


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Spell Check

Safford , AZ
1/20/2018 09:26 PM

  C.K. I'm wanting to understand your logic. Why are you using only ag land assets in comparison to credit market debt?

mark hoy
seattle, WA
1/23/2018 07:27 PM

  LAND is the Earth itself and it is absolutely indispensable and absolutely you cannot manufacture more of it. Land is worth more than any other asset BY FAR.. every other asset depends upon it.

bad axe, MI
1/18/2018 07:20 PM

  Mike The credit market debt was 28 trillion in 2000 when Bush took office , 8 years later the credit market debt was 68 trillion in this country . The credit market debt in 1980 was 4.7 trillion it took over 200 years to get it to that. The credit market debt now is 70 trillion, that's why land is so high and isn't cost effective to use for agricultural production because we priced ourselves wright out of the world market . MIKE YOU WOULD HAVE TO GET $77,000.00 PER ACRE FOR ALL OF THE 900 MILLION ACRES OF CROP, PASTURE AND GRASS LANDS IN THE UNITED STATES TO PAY 70 TRILLION OFF. MIKE IF YOU TRIED TO PAY OFF 70 TRILLION WITH THE 300 MILLION ACRES OF ROW CROP GOUND IN THE UNITED STATES YOU WOULD HAVE TO GET $233,000.00 PER ACRE TO DO SO. ANYONE THAT THINKS THIS IS GOING TO WORK ITSELF OUT FOR THE BEST FOR AGRICUTURE IS IN FANTASY LAND .


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