I know that the value of gold is determined by the banks but what are their calculations?
Say hypothetically a meteorite with 10,000 tons of gold crashed in the middle of the US. We know the value of gold would go down, but by how much and how is that calculated?
In: Economics
the value of gold is lower limited by the cheapest scalable cost to source the gold.
The upper limit? demand. any particular source of gold is not scalable. so the next higher-cost source for gold comes into the game. and the next, and the next. untill demand is satisfied. The marginal cost to isolate one more atom of gold will be the value of gold.
Note that the gold supply is basically infinite, you could source it e.g. from sea water. It justs that the efford to do it is too high compared to other methods.
Same with oil, helium, bitcoin, or chalk.
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