Australian Bullion Company

This second video follows on from Part 1 that discusses gold versus silver investment. In this second part video, Peter August of The Australian Bullion Company reveals why sophisticated investors buy silver and gold bullion to create and protect their wealth.

VIDEO TRANSCRIPT: SILVER VERSUS GOLD INVESTMENT – PART 2 OF 2

Hi, I’m Dr Marc Dussault and I’m here with the Managing Director of the Australian Bullion Company.

Hi, Marc.

I’m sorry?

I said, hi Marc.

Yes.  And his name by the way, this happens every once in a while when do these…

I do like to be polite.

His name is Peter August.  So I apologize for not using his name because obviously we know each other, but you might not know him.  So getting on to this, we’re doing a few, a series actually of YouTube videos.  And what I have here are silver bars and what I wanted to focus on, you started mentioning something and I stopped you at the end of another YouTube video, we’re talking about silver as another investment.  Now I was in the printing industry where silver was used fro photographic purposes in film.  And a lot of the industry thought, well when film goes the price of silver is gonna plummet; because obviously film was a big user of silver components within the actual film manufacturing process.

Okay, well just…

But that didn’t happen.

That didn’t happen primarily because the majority of the silver that was used in the photographic industry was recycled.

Correct.

And that 87%, my understanding is, was recycled.

Yes.

So only 13%, if the photographic industry just fell off a cliff, that’s only a 13% drop.

Sure.

Cause the rest was just reused.

Yeah; it’s a big thing in photographic shops to recycle for the content of silver, and that was when silver wasn’t worth what it’s worth now.  How much is this 1 kilo of, what’s triple 95 silver by the way, what does triple 9 mean?

Okay.  It means…

Cause I know what 4 nines are in gold, but what is triple 9 in silver?

Okay, well that’s 99.9%.

Okay, so 99.9.

So it’s not as pure as gold but it’s pure enough for investment purposes.

So as investment grade 99.9 is good enough in silver.

Correct.

This 1 kilo bar is worth how much right now?

About $680.

680 Australian dollars.

Correct.

And this obviously is worth about..?

Five times that much.

Five times that much which is about…?

5 kilos.

$3,000.  So that’s what, you can get a sense of what this is worth.  Now why would someone invest in silver, as an investor?  A lot of people consider gold and silver bullion an investment only for the rich.

Yeah.

But in fact silver has an advantage, or has some benefits in relation to gold.

Sure.  Well I mean you can buy silver in as little as 1 ounce pieces; generally speaking you buy them either in 1 ounce coin form, or 1 ounce bars.  1 ounce coins have become very, very popular over the last 20 years, so that’s, it can cost as little as $25.

So it’s a very low entry point.

Correct.
And its fun for the kids.

Absolutely.

And its fun for collectors as well.

Indeed.

So that’s one reason.

There’s a, I mean there are…

What’s another reason from a purely financial perspective…

Sure.

That if you invest $1 in silver versus $1 in gold, what’s silver going to do different from gold cause we’ve already had a conversation with gold; because a lot of people tell me if you’re a gold investor you’re definitely a silver investor.

Sure.

And I’m not sure what the average person would make of that statement.

Okay.  Well in percentage terms I believe silver is going to go up more than gold, okay; for the following reasons, one, most of the silver that’s used in industry is in non-recoverable amounts, okay, so therefore you have, I haven’t got the specific stats, but you have a tremendous amount silver that’s being used in industry that’s just completely used up.

Correct.  So once its used that’s it.

That’s it, it’s gone forever, okay.  Two, there is actually less silver above ground than there is gone.  Now there’s more that can be mined, but at any given time there is less silver above ground.  And because a lot of it’s byproduct it’s fortunes are based on the fortunes of the larger commodities in terms of supply.

Now we talked about that when we were talking about gold.

Right, yes.

Just for people who are just listening to this segment, explain that to me again just so that from a silver perspective…

Okay.  There are very few actual only silver producing mines.

So in other words that you go into the ground looking for silver and coming up with silver.

There’s very few.

Yeah, I thought you said it was something like 25%.

Well it’s…

Or maybe even less.

Or even less.

Okay.  So that means that let’s say 3 out of 4 mines are mining something else and, oh by the way here’s some silver.

Correct.

Now that’s interesting because if you’re not mining for those, all of a sudden there’s no silver, or there’s less silver.

Correct.  So that has a large effect on the supply side.  The other big reason why people are looking at silver more favourably was there was a very large overhang of silver in the market for a long, long time because the US government had 2 billion ounces of silver, about 100 years supply of silver, that it accumulated from the silver rush and gold rush.

And when was that?

That was in the 1800’s to the early 1900’s; that they’d accumulated it and that supply ran out in 2003.

Okay.

Okay, so there was no longer this overhang that some government could come along and dump a lot of silver onto the market.  If you look at the price trend of silver it started to go up from the time that the US government announced that it ran out of silver.

Now we’ve heard a lot because this is November 2009, we’ve heard a lot about the gold price increases, it made a lot of headlines for a whole bunch of reasons which we’ve talked about.

Sure.

How has silver fared in the last, in the last decade or so?

Oh, it’s fared exceptionally well.  You had silver prices in the 3 to $4 an ounce US, we’ll talk US dollars; now, that was in the early 2000’s.

Yeah.

Now you’ve got silver at round about 17 plus US dollars.

So from $3 to 17…

It’s quite a large amount.

So 5 or 600% increase in a decade.

Now people  might think that that is, oh my gosh, well I missed the boat; well if you look at the silver price from 1971 to 1980 it went from under $1 an ounce to $40 an ounce, more than $40 an ounce.  So it had a 40 plus fold increase in price; so to see a 5 fold increase in silver and a 4 fold plus increase in gold might sound like a lot but there’s a long way to go.  I mean in the 70’s you had a 38 fold increase in gold price, so you know there’s plenty of [ ].

So there you go, reasons why you should definitely consider silver bullion within your investment portfolio.  Thank you, right Peter; thanks for listening.