Marc: Hi, I'm Dr. Marc Dussault, and I'm here with Peter August, the CEO and Managing Director of Australian Bullion Company. We're here videotaping a series of YouTube videos, to explain certain things about gold investment, and this particular video is focused on why the price of gold has gone up so much, so quickly, at least in the eyes of the public. This is an ounce of gold. About a year ago, how much was this worth? Well, actually back in 2000, and in US dollars, how much was this worth, in more or less the year 2000?
Peter: Okay. In more or less the year 2000, this was worth $258 US dollars.
Marc: So $258 US dollars?
Peter: Right. That's the low point that gold got to.
Marc: About a year ago, how much was this same $258 asset, that was purchased in 2000?
Peter: In US dollars?
Marc: In US dollars.
Peter: It was about $800.
Marc: About $800. So from $258 to $800. So how much is this worth, today, November 2009, in US dollars.
Peter: Certainly. It's actually just at an all time high right now so it's at $1116.
Marc: Wow. So that's an incredible growth. Now, a lot of people think that this has actually only occurred in the last six to 12 months. But, in fact, we were chatting the other day and you were saying that, in fact, this is a growth curve that's taken place over several years.
Peter: That's correct. See, what we're having now, is we're having a large influx of money from individuals.
Peter: Wealthy or non-wealthy individuals, but individuals nevertheless. Institutions have now started buying in earnest, and of course, more recently, central banks. In fact, central banks were the reason why gold went so low in price, because they were dumping gold at a great rate.
Marc: So the rate greater than the individual investors and the institutional investors were willing to take it up?
Peter: Correct, correct.
Marc: Interesting. So now we have an actual pull from three directions.
Marc: First of all, there's lower supply.
Marc: Or it's harder supply to get to, and then you have the institutional and the private investors. Then you have the central banks and government all vying for a commodity that's harder and harder to find.
Peter: That is exactly right.
Marc: Now, looking forward, and I'm not asking you to look into a crystal ball. But why would the price of gold have an upper trend? How upward the trend is going to be, that's for anybody to guess, but why would it have an upward trend, just looking at the history of the gold price performance over the last 10, 20, 30, 40, 50 years? And how do you see that over the next decade or two?
Peter: Okay. Well, in terms of the overall financial Market, gold represents a very small percentage. There's only about $4 trillion worth of gold. Now that's a lot of money.
Marc: So $4 trillion, which is a lot of money, but it's not that much.
Peter: It represents about three or 4% of the total global financial asset base.
Peter: So, there doesn't need to be a lot of money shifting into gold, and even less for silver. If we talk about silver, because that's another area of investments, but investors are increasing. So, it doesn't need a big shift for the price to go up. Now that you've got countries like India which just bought 200 tons last week, China which has been effectively putting a floor under the price. By saying they will buy gold on the dips, we have effectively got a Market which will really only go a down very small percentage.
Marc: Compared to what people think it will go.
Peter: Correct. Some people say that it's in a bubble. Well, it's only a bubble if there's a lot of supply waiting or potential supply waiting to hit the Market. But that's not the case.
Peter: Production is decreasing, demand is increasing. Economics 101 will tell you, if you have that happening, the price goes up.
Marc: Well, there you have it, the reason why the gold price is high, why it's expected to go higher, and where the forces that got it to this point still remain for the next few years, if not decades. Thanks for listening.