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some general questions on gold

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posted on Sep, 10 2007 @ 11:40 AM
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I read that gold doesn't ever really go up or down but that paper money fluctuates, gold is therefore constant. How could this be true? Gold is still being mined so if more were mined wouldnt gold be worth less?

Also lets assume a far fetched scenario for a second. The US economy is in bad shape and dollars are quickly become worth less and less; inflation. So if there was inflation gold would appear to be increasingly valuable because dollar bills would be incresingly devalued. So maybe someday gold will trade at 100 dollars per gram and not 22.61 dollars per gram. But if this were all ture even though the gold would be worth more dollars wouldnt the decreased buying power of the dollars negate any benefit to the increased cash "value" of gold?

example: gold is worth 20 dollars a gram originally. Suddenly because of inflation, the price per gram is 60 dollars...3x original. You sell the gold and get 60 dollars but find that everything costs 3 times as much.

When would gold actually increase in value if there were not some kind of market crash or other severe economic situation that killed the value of currency.

Obviously in some kind of situation where hyperinflation was involved one may opt to actually use small pieces of gold as currency where cash would be worth nothing.

A bit of clarification would be great.




posted on Oct, 2 2007 @ 03:37 PM
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You're mixing ideal conceptual issues that never exist and falsehoods. First off the price of anything is determined by what someone will pay for it and someone will sell it for.

Gold goes up and down in value because someone bids an ounce per Gold at $x.xx value. Someone else sells it at $y.yy value and no one buys that so the seller might lower his price to a buyers' bid...etc.

Then you have macro economic forces such as supply, inflation, costs of consumables etc.

Because the price doesn't increase by inflation alone you do not have the "it sells for 3x more but things cost 3x more". Inflation isn't always so uniform, you can benefit from inflation by moving to a region where inflation is slower - working in an area where the cost of living is higher.

Imagine working in San Francisco but saving all your money then moving to the deep south, you'd be FAR richer than anyone in the deep south just working a simple job in San Francisco.

Of course you'd have to live in a box to save all your money.

Inflation must be considered when dealing with growth of price of anything, stocks or gold etc.

That means if the price went up 10% but the inflation rate was 4% your value in that commodity only increased 6%.





 
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