Gold sold off big this past week, posting its largest two-day dollar drop ever, and its biggest percentage drop since 1980. Okay, but what does gold have to do with mortgage lending and housing?

Gold is considered a haven asset. Gold is an asset investors flock to when they are fearful, particularly if they are fearful over slow economic growth and inflation. When investors are fearful money flows to gold.

But the recent sell off points to money flowing out of gold. This tells us that investors are becoming less fearful and that more money will be flowing into other asset classes. This also tells us that more investors are expecting more economic growth – which is good news for housing and mortgage lending. When more people expect more economic growth, interest in housing rises and financing becomes easier to come by.

We mention gold because assets markets are interconnected: money flows from one asset class to another. Money flowing out of gold means more money will likely flow into stocks, real estate, and capital investment, which should help the economy and increase job opportunities and wages.

In other words, investors today are becoming more interested in growing wealth than preserving it. This is good news for the economy in general, and for large-item goods (like housing) in particular.

 Courtesy of Jessica Regan.

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