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RE: Study Finds Oxytocin Can Be Used To Make National "Populations Less Xenophobic" - Apparently, Immigration Is Hard Enough To Sell You On That Doping Is Worth Considering - Are Anarchists Still Pro Open Borders?
Adding demand will increase price momentarily, but economies change and adapt. It's not a static system.
For example, increased demand for gold increases gold mining profitability, which increases gold mining efforts, which increases supply in turn, which lowers prices.
In the case of diamond mining, people destroy diamonds to decrease the excess supply caused by the demand. So indeed, extra demand can actually lower prices over time.
Good points.
These points do require assumptions, however. For example:
"which increases supply in turn, which lowers prices."
This assumes gold supply can simply be "ramped up". However, it's not always that simple, as many gold deposits are already explored and tapped.
Also, price is sometimes not connected much with the ability to increase supply of commodity goods. For example, with some metals such as Silver, fairly large amounts are mined as a byproduct, not directly, and therefore price often is unable to increase the overall supply pool by as much as would be optimal for equilibrium.
If 99% of your mining is for zinc or aluminum and 1% is silver byproduct, you don't scale up production if silver doubles in price.
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