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Why is the gold price high and why is it expected to keep going up? This video interview asks and answers these questions.

Video Transcript:
GOLD PRICE HIGH

Hi, Im Dr Marc Dussault and Im here with Peter August, CEO and Managing Director of Australian Bullion Company. And were 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? Actually back in 2000 and in US dollars, how much was this worth in more or less the year 2000?

Okay. In more or less the year 2000 this was worth US$258.

So US$258.

Thats the low point that gold got to.

About a year ago how much was this same $258 asset that was purchased in 2000?

In US dollars it was about $800.

About $800; so from 250 to 800. Now how much is this worth today, November 2009, in US dollars?

Its actually just at an all time high right now, so its $1,116.

Wow! So thats an incredible growth. Now a lot of people think that this has actually only occurred in the last you know 6 to 12 months, but in fact we were chatting the other day and you were saying that in fact this is a growth curve thats taken place over several years.

Thats correct. You see what were having now is were having a large influx of money from individuals

Yeah.

Wealthy or non wealthy individuals, but individuals nevertheless, institutions have now started buying [ ], 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.

So at a rate greater than the individual investors and the institutional investors were willing to take it up?

Correct. So, so

So now we have an actual pull from three directions.

Yes.

First of all theres lower supply.

Yes.

Okay, or its harder supply to get to, and then you have the institutional and the private investors, and you have the Central Banks and governments, all vying for a commodity thats harder and harder to find.

Thats exactly right.

Now looking forward, and Im not asking you to look into a crystal ball, but why would the price of gold have an upward trend? How upward the trend is gonna be, thats 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 you see that over the next decade or 2?

Okay. Well in terms of the overall financial market gold represents a very small percentage; theres only about 4 trillion dollars worth of gold. Now thats a lot of money.

So 4 trillion, which is a lot of money, but its not that much.

It represents about 3 or 4% of the total global financial asset base.

Okay.

So there doesnt need to be a lot of money shifting into gold, and even less for silver, if we talk about silver; thats another area of [ ] investments.

Sure.

But investors are [ ] so it does need a big shift for the price to go up. Now that youve 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 down very small percentage

Compared to what people think it will go

Correct. Some people say that its in a bubble. Well its only a bubble if theres a lot of supply waiting, potential supply waiting to hit the market. But thats not the case.

Correct production is decreasing, demand is increasing; economics 101 will tell you if you have that happening price goes up.

Well there you have it, the reason why the gold price is high, why its 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.

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