"The other issue is possible flight of capital: as you know the AUD is a ‘hot’ currency and it can leave the country in the blink of an eye. I guess it probably wont happen...."
I would say that "flight of capital" is situation normal for Australia every time global markets go a bit wobbly. The AUD is a commodity currency. It is "hot" almost by definition.
This isn't something to hyperventilate over. Since December 1983, for every AUD sold by a foreign investor, there is an AUD bought by someone else. The size of the AUD money base doesn't change. Only the value of the AUD against other currencies changes.
This can have an marginal impact on the broad economy as the cost of imports and income from exports changes in AUD terms. But net impact of such changes in AUD affects about 3% of GDP, so the "collapse" in the AUD has to be very big indeed to noticed in main street Australia.
What has all of this got to do with the price of gold? Given that the AUD tends to fall faster against the USD when things are wobbly, I would expect Australian miners to do well.
