Chaion Lee asks whether the value of gold is regulated by the marginal or
average cost of gold production.
I don't really think this is a short question. The problem is that in
order to answer it it is necessary to specify a model and in the course
of doing so establish the level of abstraction at which you are working.
I think now that the relative price of gold is largely determined by
speculation on future technological change in gold relative to other
commodities. Given the relative price of gold, the marginal cost of
production would in the intermediate run determine which gold producers
would be active, and which mines would be closed down, as in any industry.
Duncan Foley