And if the derivatives bubble is going to pop, you'll be too busy surviving to worry about your money.
i'm really glad you brought this up. i've been meaning to talk about this.
miscreanity calls gold an asset as do i. i believe that gold as an asset can inflate just like any other asset via USD inflation. the derivatives mkt is no different. as is the gold derivatives mkt. gold pundits argue that if we get a gold derivatives implosion there will be a scramble for physical gold which will drive it to the moon. but you have to ask yourselves: what were those derivative positions funded with? Answer: USD's. so if anything, a gold derivatives implosion should cause a scramble for USD's (or a shrinking of the total virtual USD's depending on how you like to think about this) causing a further skyrocketing of the USD. if THAT happens, what becomes of the physical gold price?
Decoupling.
Back in 2008, hedge funds and investment banks were selling whatever they could get their hands on so that they could meet redemption requests. Of course, these redemption requests were for dollars, so the cost of the dollar went up and the price of everything else went down, which was strange to people that thought this was the collapse of the dollar system that they had been waiting for.
But, there were some oddities. Funds sold a lot of their holdings of paper metals, like GLD. Now GLD and gold are linked through a complicated relationship (which is the entire point of GLD), so as GLD was dumped, the price of gold went down with it. Except that if you wanted to get your hands on actual physical shiny yellow metal, you had to pay a ridiculous premium for it. At several times, the premium was so high that it actually cost more to buy physical gold than it had cost before the spot price tanked.
At the time, I was watching silver much more closely than I was watching gold. One day when spot silver was under $10/oz, I remember the local coin store wouldn't part with a round for less than $20, and if you wanted Eagles, they were at least $22 each. I called around, and other dealers were demanding pretty similar prices. I don't think the gold premium was anywhere near 100%, but it was still pretty steep, maybe 30%-50%.
The price of actual physical metals had very much decoupled from their paper prices. Over time, they converged again, mostly by waiting for the paper prices to rise up to meet the physical prices. The funny part is that I've never
ever seen historic data on premiums, so it is easy to forget that it happens, or even to never know about it in the first place.
So, the next time there is a panic (now?) and funds need to dump stuff to buy dollars, the paper price of physical metals will certainly drop, like you say. But that doesn't mean that those prices will have any bearing on the actual transaction prices in the real world.
I'm of the opinion that the situation back in 2008-2009 was very unusual. I wouldn't be willing to bet that the next event of this sort will actually cause the markets to decouple to the same extent, but there are quite a few gold and silver pundits that would be.