Question about possibility of making profit on the decreasing value of an item. Noob Question - conceptual discussion only.

This question is the result of a conversation a bunch of us had over the weekend.

The best explanation is a scenario: Let's pretend that you KNOW for a fact that gold is going to depreciate (??)... go down in price. For example, it sells for $1000/oz now, but you have insider secrets that tells you the price will be $500/oz in 6 mos. No question - it's a fact. Let's pretend your old buddy just found a huge pocket of gold and he's gonna flood the market. (just play along here....)

You - the financial genius that you are - know this and use this knowledge to buy other items that make you hyper rich as a direct result of gold going DOWN in value. Woot! go you!

Problem is: how does that actually work? I get that if you invested $1M into gold and you sold it before the price crashed that you actually SAVED money using your secret insight. But this is preserving money you already had.

But based on what some of us either heard directly and/or was inferred... it appears that something else is actually possible. To invest in the opposite item and see THAT price go up as a direct result of Gold's decreasing value.

For example: you know gold is going to plummet.... so you take your life's savings and you load up on silver. Gold drops and silver gains. Yay! You've made tons of money!

That's the crux of the confusion. It appears that some of us believe there is a way to directly earn profits (not just preserve value) in the market by buying the opposing item of Gold. And others feel that no- you just preserved value by avoiding the future-depreciating-item.

We are all at odds on this, and I thought I'd toss this NOOB question out for explanation.

Is it possible to make a profit on something else with the knowledge of something decreasing n value? If so, how is that actually done? In my basic example... why would silver go up because gold went down? Also - what is the 'opposite' of ore? Is it another ore item? or something wildly random - like pork bellies.

Or is there a general confusion about what is happening - and you are really PRESERVING your investment more than profiting? So you had 1M to start, and managed to keep your 1M while everyone around you lost 50% of their investments?

A bunch of noobs would really like to understand this concept better. Also; there may be a bet on the matter.

Submitted June 23, 2014 at 03:36PM by NomNom_DePlume http://ift.tt/1nxoD0N