Posted AT 6:00 AM EDT on 16/04/08
Why high gold prices don't lead to supply
Ask an economist what happens to the supply of a commodity as its price rises and he'll tell you it eventually goes up as producers try to take advantage of good times.
History shows that it isn't necessarily so with gold, though, and that history makes a pretty good case for the metal.
In the 1970s, bullion prices rose from $35 (U.S.) an ounce to $700, yet gold production fell sharply. Why? In 1970, the gold mining industry was in terrible shape.
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