There has been no shortage of commentators who remark the insecurity of holding paper gold of one kind or another. The better strategy would seem to be to hold actual physical gold ... but even that can be (has been, in the past) confiscated under capital control measures. This discussion has been going on for some years now, but what I have not seen discussed is how gold mining shares would fare in the event of a major economic and financial collapse.
I do not have anything more than a layman's knowledge or experience of financial matters, but it seems to me that, rather than holding either paper or physical metal, it is preferable to hold shares in sound, low cost precious metals producers. Even as high inflation pushes ever higher the POG, such companies go on producing more. That is, while: with physical metal your wealth (i.e., purchasing power) is being maintained as ounces held x the currency inflation rate; with gold mining shares your wealth is increasing as expanding number of ounces in which you share x the currency inflation rate.
Also, your wealth held in this form seems less open to confiscation ... although, I guess, nothing is absolute.
What are people's thoughts, if any, on this question? That is, on the question of the relative merits of holding metal (paper or physical) or holding shares in a sound, low-cost producer?
Of course, it is also not entirely clear whether we are going to see inflationary or deflationary pressures when finally the crunch comes. My own guess is high inflation first, followed ultimately by deflation of some kind as a new currency system is introduced. In any case, assuming, as I do, that the best way to protect one's wealth is to hold precious metals, which will fare best, paper or physical metal, or sound low-cost producer shares? What are your thoughts?
