Gold and the term "Depreciation"

Hello all Members,

I am having a doubt when I have a compound of the words as Gold, Forex and Depreciation.

Question :- 

Depreciation has two meanings the one we used in ordinary field is "Wear and Tear & etc" and other meaning which we use for the FOREX (i.e for eg. $ 1 = INR 30 in 1991 and $ 1 = INR 45 in 2011, hence we would say the INR has depreciated in the FOREX market basic demand and supply, non-stimulus to Government's decisions else we would have to call it devaluation.... that’s not my point).

Mr. K wants to sell a used Gold jewellery to XYZ & Co. a gold dealer (bought in year 1991 for INR 10,000, 100 gms units of Gold @ market rate INR 100/gm), in year 2011 ( where100 gms units of Gold @ market rate is INR 500/gm, hence the selling price would be INR 50,000.) . The XYZ & Co. offered Mr. K INR 48750 for the used Gold jewellery, and the Company claims that difference between the Market Rate and Sale Rate (INR 1250) is the "Depreciation", the wear and tear on the product. 

The argument:

PART 1) I and my friend had an agreement, where I support that the INR 1250 is not depreciation, but a mere charges or the way of business of the gold dealer, and if i use the field term its a Capital Loss for Mr. K,  where as my friend too states that its a way of business of the dealer, but that rate which the dealer charges is the depreciated rate for that Gold, and says that is because of its usage (wear and tear).

PART 2) So my friend went on giving me other source of information in his support of thought, from an ECONOMICS book which states the second meaning of depreciation the FOREX one, his saying is that if gold is sold less than the market equilibrium its a depreciation (eg. on 1-4-2011 at 12.30pm gold rate is INR 500/gm, and is sold at same moment for INR 487.5/gm),  

                     Here comes the confusion, GOLD is used as the most liquid investment and is convertible to any currencies, any rate fluctuation would result in Capital Gain\Loss from the date of investment, or Profit/Loss for the Gold business concerns. Hence I would take gold as an currency, and as currencies in the FOREX fluctuate, its either a depreciation or appreciation, so can we say that the Gold has depreciated if the market rate is INR 95/gm in 2011.

We took an hour to explain each other our thoughts but we ended up nowhere, hence I took up the topic on a public portal where experts would shed a little light on the topic, as a C.A. student i just want a clarification that what I was supporting was sensible for my friend, which was not when I tried explaining him, hope I get a good response.

cooldubai