Price vs Value

Something can go down in price yet still go up in value and vice versa.

For a good example of this let's look at the price of silver.

The price of 1 oz of silver went down from $40 an ounce in early April 2011 to about $36 an ounce in mid May 2011.

That was a 10% drop in the price of silver. A 10% drop in price does not mean anything until you compare it to the price of something else.

If the average price of another commodity or asset went down greater than 10% during the same period then the value of silver compared to that other commodity or asset actually went up in value.

Put it another way if before it took 3 ounces of silver to say buy a barrell of oil and now it took 2 ounces of silver to buy a barrell of oil then it does not matter if the price of silver went up, down, or stayed the same. What we do know is that the VALUE of silver went up compared to silver. We can do the same thing and compare silver to cotton, sugar, tea, lumber, a gallon of milk, a gallon of gas, the average price of a home or whatever you want to compare it to.

 

 

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