Physical Gold or Gold Mining Stocks?

In terms of Australian dollars, the price of gold has reached all time highs. Because the US dollar appreciated in 2008, the price of gold in US dollars actually went down in 2008.

I have been thinking of about buying some gold, but instead of worrying about where in my house I should hide it, I was thinking about buying gold mining stocks instead. Australia's biggest gold miner is Lihir Gold.

Looking at the price of Lihir Gold shares, it is clear that the company's share price seems to move together with the Australian market (the All Ords index) more than it does the price of physical gold.

This could mean that gold mining stocks are a very imperfect substitute for physical gold. Perhaps this also shows that gold mining stocks, and even the Australian stock market, is undervalued.