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Gold Price: 1611.52 AUD
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Gold Investment: Why Gold?
Marc: Hi, everyone. I want to thank you for taking some time to watch this YouTube video. I'm Dr. Marc Dussault, and I'm here with Peter August of the Australian Bullion Company. I just wanted to take a few minutes and ask him a few questions, on why would anyone want to invest in gold. What we have here are some gold bars and some gold coins, and you can see I just have a regular BlackBerry mobile phone, so you can see the difference in size. First of all, how much gold is actually on the table?
Peter: Well, we've got 105 ounces altogether, sitting here.
Marc: So this is 20, 20, 20, 10, 10, 10, 10, 10, and then?
Peter: Five 1 ounce bars.
Marc: And this is 1 ounce. Now, right now, we're the 16th of November. This 1 ounce is worth how much?
Peter: About $1240.
Marc: $1240, Australian.
Peter: That's correct.
Marc: Now, that's incredible. What was it, more or less, about a year ago?
Peter: About a year ago, it was about $900 Australian.
Marc: So it's gone from about $900 to $1200.
Marc: In one year. Not a bad growth. Now, tell me just three or four reasons why the person who's watching this would want to invest in gold.
Peter: Yes, certainly. The first reason is as a hedge against inflation. There's a lot of money that's being printed.
Marc: So what does "hedge against inflation" actually mean, for the common, everyday person?
Peter: Yes, certainly. There's a lot of money that's being printed at the moment.
Peter: And by governments around the world. That money printing actually causes inflation, because there's more dollars or yen, etc., chasing less goods. Now, how do you protect your purchasing power?
Marc: So that means that every dollar that's printed, or every currency that's printed, is worth less and less because there's more and more of them.
Peter: More and more of them, that's correct.
Marc: Why is gold different, though?
Peter: Well, because, A, you can't print gold.
Marc: You can't?
Peter: So it can't be manipulated by governments.
Peter: And if you look at world gold production, it's actually going down. So, you have, in effect ...
Marc: And world gold production is going down because the reserves are harder and harder to find, is that right?
Peter: That's correct. You know, the last elephant, in terms of gold strikes.
Marc: The mine. Yeah.
Peter: Was found in Ecuador, and Ecuador's a very unstable region, politically. And in fact, that ...
Marc: And when was that found?
Peter: That was found several years ago, now.
Marc: So, five or ten? Twenty?
Peter: No, no, no, in the last five years.
Marc: OK. In the last five years. OK.
Peter: So, that particular, and last year, Ecuador put a moratorium on all mining.
Marc: So now, in other words, one of the big sources of supply. is actually now being restrained?
Peter: That's correct.
Marc: So that's one reason, or one of the reasons, why to invest in gold. Why else would someone invest in gold?
Peter: Geopolitical risk is another key.
Marc: I love your big words. What's geopolitical risk, for the average everyday person?
Peter: [laughs] Certainly, certainly.
Marc: I know you have a thesaurus in that head of yours, and I know you have 37 years of experience in the rare coins and gold industry. But for the average, everyday person, this is why we're doing this YouTube video, Peter!
Peter: Sure, sure.
Marc: The reason I say that, and we laugh, is because this is the kind of investment that a lot of people, especially the people who are going to be watching this, think that this is only for rich people.
Marc: Or this is really an investment that governments take this stuff and put it into a vault.
Marc: When, in fact, you're actually selling to everyday Australians.
Peter: Absolutely. Now, I don't mean to use big words.
Marc: But what's geopolitical risk, when I look at it in the dictionary? In the [inaudible 00:03:36] dictionary, yeah.
Peter: Geopolitical risk, for the layperson, it just means growing global political tensions.
Peter: OK? So we have growing global political tensions revolving around the Middle East.
Peter: Which revolves around oil.
Peter: OK? And the Arab-Israeli question.
Peter: We have geopolitical risk in Afghanistan, Iran, with the possibility of the Iranians producing a nuclear bomb.
Peter: So, those are the hotspots. North Korea is another one.
Marc: Yeah. But you also have other geopolitical risk, because it's not just about terrorism, it's not just about armed conflict, but it's also the fact that the global financial crisis creates another geopolitical risk.
Peter: Well, that was going to be another point I was going to raise. Yes.
Marc: But it's shifting the power of the politics of doing business globally.
Marc: On top of, obviously, the one that you're going to talk about, which is the financial system issue.
Peter: Indeed. Indeed. And so, that was going to be my next reason. But just getting back to geopolitical risk, just so the layperson can understand. In times of conflict, people, historically, for thousands of years, have gravitated to gold. They see it as the ultimate security. OK?
Marc: Because, it's solid.
Peter: It's solid. It doesn't rust. It doesn't change its form, other than the form that you give it, over time.
Peter: So you could put it away for a million years, and it would come out exactly the same as it was put in a million years later.
Peter: So, it's really the ultimate immutable store of money.
Marc: What's another two reasons, why someone would invest in gold?
Peter: OK. Sure. The global financial crisis, illustrated the fragility of the financial system.
Peter: Now, in times like that, if we had a financial collapse, what does that mean to the average person? That means that the money that you are using is no longer able to be used. So what do you have as a medium of exchange?
Marc: Or if it's not able to be used, it doesn't have the same power, the same buying capacity that it previously had.
Peter: Well, that's if the currency ...
Marc: Because in a country like Australia, people aren't worried that the currency isn't going to be worth anything. What they're worried about is the fact that it's not going to be worth as much as it was previously.
Marc: Whereas in other countries, the actual value of the currency, when we talk about the Mexican peso, for example.
Marc: Which was highly, highly devalued, and other countries, as well. Argentina was another example.
Peter: Yes, that's another example.
Marc: The currency was able to be used, but the percentage increase of inflation was triple or quadruple digits in one year.
Peter: Yeah. I'm not talking about inflation, though.
Peter: I'm talking about the risk of financial collapse. Now, most people will say, "Well, that's a very remote risk."
Peter: But what most people don't realize is how close we actually came to that situation.
Peter: Last year, when the collapse of the Lehman Brothers triggered..
Marc: And we'll talk about that in the next segment.
Peter: Sure. Certainly.
Marc: So, people come back to this because it's a safe haven, hard asset.
Peter: Yes. That's correct.