Is it better to invest in gold or in gold mine stocks?

Think of it this way. In a hypothetical mine, the production and other related costs to get an ounce of gold is $1000. Suppose the gold market price is $1100, the mine makes a profit of $100/ounce. However, if the gold price doubles and goes to $2200, the mine makes a profit of $1200/ounce (production cost stays the same). In other words, the mine's profits jumped 12 times when the gold market price went up by just 2 times. Same works on the downside too. If the gold prices drops 20%, the mine is in red ink. 

Thus, gold mining is typically a levered investment in gold and hence more risky. Moreover, you need to think of the following factors in investing in a mining company:

1. Is the mining company a junior (who mostly explores for new reserves) or a senior (who buy the promising mines from juniors and extract the metal). Juniors are quite risky.
2. Are there labor unrest or political instability in the area? In the past, many countries have nationalized mines and workers have disrupted production.
3. What are the total reserves estimated in each of the mines owned by the company?investing in the metal.
4. What is the trend in production costs? Are they going up substantially?

In general, investing in a gold mine requires a lot of homework and is not the same as