Gold Price And Valuation
A lot of people wonder “Why is the price of gold high and how is the value determined?” This short YouTube video answers this and other interesting investment questions. It’s an expert interview by Exponential Growth Strategist Dr Marc Dussault and Peter August, CEO of The Australian Bullion Company.
VIDEO TRANSCRIPT: GOLD PRICE AND VALUATION
Hi, I’m Dr Marc Dussault and as you can see its November, it’s 2009 and I’m here with Peter August, Managing Director of the Australian Bullion Company. And I wanted us to take some time today to explain something that for you is self-evident but for other 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, which by the way in today’s price is worth how much?
Over 120 thousand.
Over $120,000, so it’s a great compact way to invest. Now one of the things that we’ve all done as a kid, and Peter you remember your days back when you were a child and you started investing in coins and collecting coins.
Yes.
There’s this thing called the numismatic value of coins.
Sure.
Can you explain what that really big word is for people.
Yeah, absolutely.
Cause I have a coin here, and I have another coin here; so what’s the difference between this one and that one, other than the size?
Sure. Okay; this particular coin Marc is a 1 ounce gold coin.
Okay.
It’s 4 nines pure so that’s 99.99% pure, and it is bought and sold on it’s intrinsic gold value.
Yeah. So you’re buying it because it’s 1 ounce?
That’s correct.
Okay.
Now this…
And this by the way is a 1 ounce gold bar.
That’s correct.
So that’s a bar, this is a bar, 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 but this really is important to understand the difference between the 2. We’re gonna be talking about gold as an investment not just as a pastime of collecting coins.
Just before we get there; gold bars are also known as gold ingots.
Gold ingots, yeah.
And even some people call them gold biscuits.
Gold biscuits; I’ve heard of ingots but not biscuits.
General the Indians are called them gold biscuits.
Okay, excellent. Indians obviously from India.
Correct.
Cause there’s a really, really strong tradition in Indian culture which we’ll talk about later.
Sure. Okay…
Why is this in a cardboard, actually it’s not a cardboard…
It’s in a coin mouse and it is to protect the coin. Now you asked the difference between a gold bullion coin and a numismatic coin; numismatic means that it has collective value over and above the intrinsic metal value, whether it’s gold or silver.
In other words this is worth whatever an ounce of gold is worth…
That’s correct.
This is worth whatever the weight of this is, plus something else.
Plus a premium for its rarity.
Okay.
Okay; so that’s essentially the difference between bullion and numismatic.
Excellent. Now the other thing is, this is a 20 ounce gold bar, so this is worth about 25,000.
About that, yeah.
Okay, so this is worth $25,000. And you can’t see it up close but I’m probably gonna edit it, a close up of this so that you can see, but it actually doesn’t look anywhere as nice as this coin does; so explain to me why, first of all what’s stamped on it and why the actually bar actually has that kind of rough feel to it.
Sure. When they make, when bars are made they’re made in large quantities.
Yeah.
Okay. They’re poured into a mold and then as the metal is cooling down it is stamped.
Yeah.
Now that’s the way gold bars have been made for thousands of years.
Thousands of years.
So that’s the way it’s known to the market. They’re slightly rough, they’re not perfect.
Okay. In other words they’re not square edges, they’ve got that rough look and all of them actually look different. Some of them actually even look like they have fingerprints.
Well I assure you they’re not fingerprints because the person who put a finger on a hot piece of gold would have…
I understand, but that’s actually what it actually looks like. This one actually looks like a fingerprint.
Yeah, what it is, it’s actually the ripple in the metal as it…
As it cooling.
As it’s being poured the outer part of the metal is slightly cooling, cooling, cooling, so it creates a ripple effect.
Wow! Now this one doesn’t have a ripple effect but it looks like it has dents. So it looks like its actually dented in, obviously its not.
Yes. Again that’s the central part of the pour generally speaking.
Yeah.
Okay; now this particular coin versus a bar is…
By t the way this is very heavy.
And very valuable. This particular coin versus the bar is they use specially made dyes, they get special blanks the made up.
Yeah.
And there is of course a cost to all that.
Sure.
So when you buy gold in this form you actually pay a premium to gold in bar form.
And what would that premium be?
It can be as much as 6 or 7%.
So 6 or 7%, so it looks nice and pretty like this, so it’s kind of a fun, tells a story, it tells a history of a country, or something of …
Symbolism.
Some kind of symbolism in this series, often you have to buy a series of coins. It’s a great way for kids to start learning about history and investing in coins. When you have actually bars like this they’re not actually serialized, or are they?
Well, generally speaking on smaller bars these days they’re not serialized.
They’re not serialized.
They don’t have serial numbers anymore. In the olden days…
They might have some serial numbers.
Correct. You’ll see some of them…
So like this one here, would that be a serial number?
No, that’s the fineness, that’s the 4 lines…
That’s the fineness, okay, so that’s… So explain to me if you can, why is it 99.99%, why is it never 100% gold?
Well on earth you can never get 100% pure, there is always some impurities. My understanding is that in space they can get it to 100% or as close to it as possible; but it could be one part in a billion, it could be one part in a centum, but there’s always slight impurity. So the standard for investment grade gold in the world today is 99.9%, or 4 nines pure as they say.
So 4 nines pure is 99.99%?
Correct. One other thing that I’d like to say as well, with regards to investing in gold, if you buy 4 nines pure in Australia you don’t pay GST on it, whereas if you buy anything less than 4 nines pure, for example, a sovereign was commonly traded as a gold piece right up until the introduction of GST; but now because it’s less than 24 carat, or less than 4 nines, it’s actually 22 carats which is 91.6%, it attracts 10% GST. So for people thinking of investing in gold…
You want to go to 99.99%.
Correct, so you don’t have that extra 10%…
You see, it was worth listening to this YouTube video just to know that. Thanks for listening.
As a person who is very much concern about my gold investments, it is always important to seek updates about world’s economic and gold conditions. So, thank you for letting us know about this.