On Makoto's question of how changes in the production cost of gold lead
to changes in the gold price of commodities:
I think it is worth considering the role of speculation in this process.
Gold is a durable good, and speculators can and do form hoards of it on
the basis of their expectations as to the future course of gold prices of
commodities. An unexpected decline in production costs of gold would lead
speculators to lower their reservation price for gold, and thus
effectively to raise the gold price of stocks of other commodities. This
mechanism doesn't involve the mechanical reasoning of the Quantity of
Money Theory of Prices at all.
Duncan