Marc: Hi, I'm Doctor Marc Dussault, and as you can see, it's November, it's 2009. I'm here with Peter August, the managing director of the Australian Bullion Company. I want to take some time today, to explain something that, for you, is self-evident. But for a lot of people out there, who are considering gold as an investment, what they might not know, is that these are actually gold bars and we have 105 ounces of gold right here. By the way, at today's price is worth about how much?
Peter: Over 120,000.
Marc: Over $120,000. It's a very compact way to invest. One of the things that we've all done as a kid, and Peter, you remember the days back when you were a child and started investing in and collecting coins. There's this thing called the Numismatic value of coins.
Marc: Can you explain what that really big word is for people? Because I have a coin here, and another coin here. What's the difference between this one and that one, other than the size?
Peter: This particular coin, Marc, is a one-ounce gold coin. It's four 9s pure, so that's 99.99% pure. It's bought and sold on its intrinsic gold value.
Marc: So you buy it because it's one ounce?
Peter: That's correct.
Marc: Okay. And this, by the way, is a one-ounce gold bar.
Peter: That's correct.
Marc: So this is a bar, a very small one, but this is a coin. He's laughing at me, because I made a joke earlier that I thought this was a coin. This really is important, to understand the difference between the two. We're going to be talking about gold as an investment, not just as a pastime of collecting coins.
Peter: Just before we go further, gold bars are also known as gold ingots, and some people even call them gold biscuits.
Marc: Gold Biscuits? I've heard of ingots, but not biscuits.
Peter: Yeah, generally the Indians call them gold biscuits.
Marc: Indians, obviously, from India.
Marc: There's a really strong tradition in Indian culture, which we'll talk about later. Why is this in a cardboard?
Peter: Actually it's not in a cardboard, it's in a coin net, and it is to protect the coin. You asked the difference between a gold bullion coin, and a Numismatic coin. The Numismatic means that it has collective value over and above the intrinsic metal value, whether it's gold or silver.
Marc: In other words, this is worth whatever the mass of the gold is worth. This is worth whatever the weight of this is, plus something else.
Peter: Plus a premium for its rarity. That's essentially the difference between bullion and Numismatic.
Marc: This is a 20 ounce gold bar. This is worth about $25,000. You can't see it up close, but I'm probably going to edit in a close-up of this, so that you can see. But it actually doesn't look anywhere near as nice as this coin does. Explain to me why, first of all, what's stamped on it, and why? The actual bar, actually has that rough feel to it.
Peter: Sure. When bars are made, they're made in large quantities. They're poured into a mold, and then, as the metal is cooling down, they're stamped. That's the way gold bars have been made for thousands of years. That's the way it's known to the Market. They're slightly rough. They're not perfect.
Marc: In other words, they're not square edges, but they've got that rough look, and all of them actually look different. Some of them look like they have fingerprints on them.
Peter: I assure they're not fingerprints, because the person who put their finger on a hot piece of gold would get burned.
Marc: I understand, but that's what it actually looks like.
Peter: What it is, it's actually a ripple in the metal.
Marc: As it's cooling.
Peter: Correct. As it's being poured, the outer part of the metal is slightly cooler, so it makes a ripple effect.
Marc: This one doesn't have a ripple effect, but it looks like it has dents. It looks dented in, but obviously it's not.
Peter: Again, that's the central part of the [pour], generally speaking. This particular coin versus a bar is...
Marc: By the way, this is very heavy.
Peter: And very valuable. This particular coin versus the bar, they use specially made dyes. They get special [blanks] made up. Of course, there's a cost to all that. So, when you buy gold in this form, you actually pay a premium to gold in bar form.
Marc: What would that premium be?
Peter: It can be as much as 6% or 7%.
Marc: 6% or 7%, so it looks nice and pretty like this. It's fun, it tells a story, tells a history of a country, or includes some kind of symbolism. Often in a series of coins. It's a great way for kids to start learning about history, and investing in coins. When you have actual bars like this, they are not serialized, or are they?
Peter: Generally speaking, on smaller bars these days, they don't serial numbers. In the olden days.. Marc: This one here, would that be a serial number?
Peter: it might have some serial number on it. No, that's the fineness, that's the fullness.
Marc: Explain to me, if you can, why it's 99.99%. Why is it never 100% gold?
Peter: On Earth, you can't get 100% pure. There's always some impurities. My understanding is that in space, they can get it to 100%, or as close to it as possible. It can be one part in a billion. It could be one part etc., but there's always slight impurity. The standard for investment-rate gold in the world today is 99.99% or four 9s pure, as they say.
Marc: So four 9spure is 99.99%?
Peter: With regards to investing in gold, if you buy four 9s pure in Australia, you don't pay GST. Whereas if you buy anything less than four 9s pure, for example, a sovereign was commonly traded as a gold piece right up until the introduction of GST. Now, because it's less than 24 karat, or less than four nines, it's actually 22 karat, which is 91.6%, it attracts a 10% GST. So for people thinking of investing in gold...
Marc: You want to go to 99.99%
Peter: Correct. You don't want to pay that extra 10%.
Marc: You see? It was worth listening to this YouTube video just to know that. Thanks for listening.