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Gold Price: 1653.29 AUD

Silver Price: 20.94 AUD

Video Transcription:

Gold Versus Silver Investment Part 1 of 2

Marc: Hi, I'm Dr. Marc Dussault, and I'm here with the Managing Director of the Australian Bullion Company, Mr. Peter August. We're sitting here with gold and this is 105 ounces of gold bars, and this is another ounce of a coin. I just want to show you what it actually looks like, and it's actually as heavy as it sounds. Just so you can see, this is a regular Blackberry mobile phone, and we have a series of YouTube videos that explains why you should invest in gold. But what I wanted to do in contrast, and I'm just going to move the phone over here just so you can see the difference in size. And again, this is just a regular, this would be about the size of a 20 cent piece would it?

Peter: Yes.

Marc: That's a 20 cent Australian piece, and it's actually very attractive because, once again, it's a coin. Whereas these are bars, which have a little bit more rough texture. But the contrast I wanted to show you is with silver. Now this is one kilo which is about, it's about all of this isn't it?

Peter: One kilo, is that.

Marc: Is that. So this, is that.

Peter: It's a dramatic difference, isn't it?

Marc: Yeah, it's a huge difference. Now, this is silver and you have to get a sense for how heavy this is. When you look at it, it's got that rough texture that we talked about in the other YouTube video, about bullion. It's stamped and it's actually, when you touch it, it's got a really nice feel to it. But I want to show you another one. Now this one, how much is it? Five kilos.

Peter: That's correct.

Marc: Now I'm not going to drop it from too high up.

Peter: Enough to buy a table, yeah.

Marc: OK. And I do that so you can actually get a sense of how heavy it is. So this is five kilos. Now, in today's pricing, we're actually in November in 2009, how much is a kilo?

Peter: A kilo today is around about $680, per kilo.

Marc: So $680 for this.

Peter: Just to give you a contrast between price of gold and price of silver, it takes 63 ounces of silver to buy one ounce of gold.

Marc: So 63 to one.

Peter: That's the ratio, roughly.

Marc: Right now.

Peter: Right now.

Marc: What was the ratio historically?

Peter: Historically-

Marc: Because it's changed, hasn't it?

Peter: Absolutely, absolutely. Now, because silver was used as currency right up until the 1960s or 1970s in some countries, the historic ratio was 15 to one.

Marc: And now it's 63 to one.

Peter: Now it's 63 to one.

Marc: Wow. That's incredible. So, here you have silver.

Peter: Black silver.

Marc: Yeah, I love silver because it just makes the point doesn't it? Now, this kind of volume of silver, is worth how much?

Peter: That kind of volume of silver, what do we got? We have 12 kilos, so it's just under 12 x 7, so it's $8,000, a bit over $8,000 worth of silver.

Marc: So this is $8,000. So this is what $8,000 in silver looks like. How much is $8,000?

Peter: $8,000 in gold, well, we can't actually get it to you. One of those is $12,500, so you've got about $6,000 there.

Marc: So this would be about $6,000. So if we had two more gold bars like this-

Peter: $7,000.

Marc: $7,000. So this is almost what this is.

Peter: Yes.

Marc: So that gives you, look at the difference in contrast. Now we've been talking about gold as a safe haven asset investment for all the reasons that we've already covered.

Peter: Sure.

Marc: Why would someone, looking at investing in bullion, because there's gold and silver bullion, why would they invest in silver versus gold?

Peter: OK. Well, that's a good question that you asked. This is my answer to that. Silver has been looked upon as basically an industrial metal. Whereas, it is also a monetary asset, such as gold.

Marc: Yep.

Peter: Now, with silver you've got a number of dynamics occurring in the Marketplace. One of those dynamics is, silver is mainly produced as a byproduct of base metal production. So you have mines-

Marc: That are mining for something else?

Peter: For copper, whatever.

Marc: And this ends up being part of it, as a small percentage.

Peter: Correct. So, when commodity prices go down, that becomes a deterrent for mines to produce those base metals, and as a consequence, silver goes down in production.

Marc: Now, is that safe to say, actually that may be a good question, should be better phrased, what's the percentage of mining for silver that takes place as a direct mining metal versus as a secondary metal?

Peter: It's about 25%.

Marc: 25%. What would it be for gold?

Peter: Well, gold, there are specific gold mining companies.

Marc: What would be the percentage?

Peter: The by-product, I don't know specifically what the percentage of gold as a by-product metal.

Marc: If you were to guess it would be small.

Peter: It's small. It's very small.

Marc: It would be like five or 10%.

Peter: Because that ratio of 63 to one-

Marc: Is so huge.

Peter: It's worthwhile..

Marc: Correct.

Peter: Being able to open up just a gold mine, provided you meet all the criteria.

Marc: Correct.

Peter: OK. So that's not the case with silver. Other factors that are..

Marc: I'm going to stop you there.

Peter: OK.

Marc: We're going to do another YouTube video on those other factors. So you can just click on this link, right over here, and get to that video. Thanks for listening.