DiscussWorldIssues - Socio-Economic Religion and Political Uncensored Debate - View Single Post - What would the effect on the economy be if gold became abundant?

**Z1IRo4Ap** · 06-18-2008, 03:30 AM

Originally posted by Dauphin
If you buy at $50, then the price falls to $15 a year later and I buy from you, do I somehow "make" the $35 that you lost? No. Did the guy you bought from make $35 a year after he sold it? No. His profit depended solely on his purchase and sale prices. He may look at the paper and say, "Good thing I sold last year and cut my losses," because he bought at $60.
The person who sold at $50 would have done (in opportunity cost terms and arguably in real terms) if he bought the gold back from you at $15. Which would be sensible as gold is cheaper and will very likely raise in value again.

Of course, all this implies that people buy gold as an investment opportunity, they don't, they buy it to avoid risk and negative growth in asset values - which is why gold prices tend to be inversely related to stock prices.
Errrm, that was the stock example where a price drop does not generally recover but is a sign of severe trouble. The gold commodity trade is the example that followed.

Besides "would have done" is the gotcha of trading. Like all the poor sobs who bought at $600+ in 1980 and it took 26 years for the price to return to that level in real dollars (it would have to get to $2000+ in 2008 dollars to break even after inflation).

06-18-2008, 03:30 AM	#23
Z1IRo4Ap Join Date Oct 2005 Posts 433 Senior Member	Originally posted by Dauphin If you buy at $50, then the price falls to $15 a year later and I buy from you, do I somehow "make" the $35 that you lost? No. Did the guy you bought from make $35 a year after he sold it? No. His profit depended solely on his purchase and sale prices. He may look at the paper and say, "Good thing I sold last year and cut my losses," because he bought at $60. The person who sold at $50 would have done (in opportunity cost terms and arguably in real terms) if he bought the gold back from you at $15. Which would be sensible as gold is cheaper and will very likely raise in value again. Of course, all this implies that people buy gold as an investment opportunity, they don't, they buy it to avoid risk and negative growth in asset values - which is why gold prices tend to be inversely related to stock prices. Errrm, that was the stock example where a price drop does not generally recover but is a sign of severe trouble. The gold commodity trade is the example that followed. Besides "would have done" is the gotcha of trading. Like all the poor sobs who bought at $600+ in 1980 and it took 26 years for the price to return to that level in real dollars (it would have to get to $2000+ in 2008 dollars to break even after inflation).
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