In this episode, Alistair Schultz, ACY Securities Chief Market Analyst, visits Guardian Vaults, the most secure and premium private vault company in Australia, to talk Gold & Silver.
Hello, and welcome to an ACY securities video special today. I'm standing right outside the front of Guardian Vaults. So go and have a little bit of a chat about Vaults. Now in any asset class, whenever you are actually investing, it's important to know what's going on within that market from the consumer level, all the way up to the CEO, depending on what that market might be in this instance today, we're going to be looking at gold from the physical world and getting an idea of what the trade looks like on that side.
Hello, John and Felipe, how are you both ?
Thank you very much for having us today. I appreciate it a lot and it's honestly going to be great for some of our people that might want to know a little bit more about gold. Now, today I'm at Guardian Vaults, as I was mentioning before, and I'm with Felipe and John, both members of the volt here. And they're going to give us a bit of a rundown on what's going on. So Felipe, could you give us a bit of an idea about what happens here at Guardian Vaults?
Okay. Well, Guardian Vaults is the oldest private secure facility in Australia. We've been in existence in Melbourne for over 18 years. This facility was purposely built about 10 years ago, and we've got the highest secure facility in Australia. So what we do here is we provide storage facilities for clients that want to store anything from their personal items till of course gold and silver. And we also have got our gold department where we sell gold and silver, and that's what John comes in as his specialty.
Excellent. So when it comes to the gold side of things, I mean, is that now a main attribute of Guardian Vaults?
It's definitely one of our big aspects because we like to talk about a seamless solution, so you can actually buy gold and silver and in store it. And then when you want to sell it back to us, we'll also buy it back. So everything can be done in one location.
There are a lot to really discuss on the idea of how the gold and the silver side of things actually work for the rest of this video and where we decide next is really going to be talking about what we might anticipate from maybe a macro or a micro level, but more importantly, from your perspectives, I'm really keen to hear a lot more about what we might see on the learning side, on the physical side of the trade, instead of just the online like I'm used to. So let's get to it. We're going to have a look at a vault, and we're going to get a bit of an idea a bit more about the physical world of gold after you gentlemen, let's walk through.
Yeah. So each customer gets a individual code and we scan their hands and that's how they have to access. So I'll put my code in, so you can't get in here without this, and then it pops up on the godson. You will recognize us and
Well we'll prove.
Well, that is an impressive door, but this one looks a hell of a lot cooler. What can you tell me about it for late?
This is all main door for a vault and it's actually not just for show. It closes every night and it goes on a timer. So once we close this door, it's impossible to enter between five and nine it's. It's been a purpose-built in Miami and shipped over here where there were four tons. So it's definitely one of our impressive features. Yes.
So there's four ton of door on this and it's all automated in the way that it closes itself. There's no one actually has got to come on this side and drag it across.
No, we actually drag it, the clock crossing and close it manually. It's actually surprisingly easy to move when you get it going. So it's just, if you want to try and stop it again, stop and all that. So yeah, that's people are always very impressed with it still.
I mean, in terms of this door, I mean, it's obviously multiple levels of security to get in. You've got volts on one side here. There's another one as well. What are some of the things that you might find as being the most common product for Guardian Vaults? What is, what is it the people like, do they like the little box or they like the big box?
Well, we've got a lot of little boxes and the people that rent a little boxes store, anything from their personal items, like passports or pictures. Then we've also got to the mortar bullying States where people go into larger items like the bullying, but in these walls you can store basically your jewelry, your personal items. And then we've got in our other boards, we've got the bigger items where you can store up to a couple of ton of silver or gold if you'd like to John,
Can you tell us a little bit about what type of products are kept behind in this vault here?
Yeah, sure. I'd say majority of the clients that are storing here, a story in other globally, silver bullion jewelry documents and other valuables, including like pink diamonds for instance, is quite popular as well. But in terms of our larger size that we have involved too silver is very, very popular as an investment class at the moment. So when you think about silver storage pretty quickly, you can fill it up pretty large capacities and whites. So we cater to, we cater to investors from all different sizes.
So what's the heaviest sized storage of silver that you would typically see. What's the absolute maximum you can handle. Well,
Our grand boy inside holds three ton. So, adjust onto the weight of this door, but, you know, I still can't drag it out.
Yeah. So, and if you think about silver, like a million dollar investment in silver is, is a ton of metal. So so yeah, a lot of our largest sites do get utilized by just individual investors, self managed, super funds and family offices in the law.
It's not just for the retail person who might be interested in investing in silver or gold to try and offset. They're actually, you know, you've got corporate entities in here as well, who are using it to make a store of value somehow. Absolutely. Okay. And what type of, sort of customers, the typical customer that you actually get coming in here looking for a volt of whatever size it may be?
Yeah. it just ranges. You get all kinds of different investors that are out there. A lot of people at the moment are kind of concerned about, you know, the stock market being a bit bubbly at the moment, thinking that you know, equities could come crashing down and that could really increase the the value gold, for instance. So just people from all walks of life, you get the investors that are holding, say, you know, a few, few ounces of gold or, or thereabouts right through to the, you know, larger self managed, super funds, which is very popular for the, for gold and silver as well. So a bit of pretty decent range of clients really.
Okay. So we've got the, who we've got a bit of the, the, how they sort of do it with all of a sudden, the volt here and what they're keeping, why do you find that people do want to do it on the whole? Is it, you know, obviously right now we've seen a lot of frothy markets going on and we've got an obvious reason for that, but what would have contributed to someone wanting to go and get an investment in silver or gold or to store pink diamonds down in a vault like this?
Yeah. So I think when it comes to investing in gold and silver, you've got a few different options out there. You've got, you know CFDs, for instance, you've got you know, ETFs and things like that. I think our clients definitely have a focus of taking physical possession of their, of their metals. If you think about gold storage, it's actually quite cost effective to store gold. For example, if you wanted to buy a million dollars of gold and actually store it in the most cost effective way it'll only cost you $272 a year, and that's the price of a small, safe deposit box, right? Cause I held around 20 kilos of white. So physical metal you know, compared to what most people might imagine, it's actually very cost-effective to store the physical product. So our investors think, you know, what, if it's cheap to store, I'm just going to go out there and get the physical metal rather than worrying about, you know, the terms and conditions of a product or you know, hidden sort of fees and that sort of thing. They know exactly what they're getting exactly what it costs and they've got the actual physical possession of it.
So what about when people actually decide to come to you guys? Cause you guys sell gold and silver as well as purchase it from whoever it may be. Yep. So do you get often get cross transactions that are coming from perhaps different currency pairs or other varieties of exchange that go on with that as well?
You often get investors. Cause we, we also have investors that are based in the us. So you might have investors that want to use us dollars to pay for gold and store it here in Australia. And things like that. So I guess our clients predominantly on the gold and silver side of the business are all AUD investors. So they're watching the Aussie dollar gold and silver price more than anything. But there is an element to you know, some of those larger clients that might hold other currencies, they might look at the market and go, you know what of what some us dollars, I'd rather put that in the gold right now. Cause I think that's going to drop it.
So w so when that sort of scenario happens where you do get someone from international sort of transactions, or perhaps they, you know, perhaps you are selling to someone internationally who wants to get a big order of it and they're paying an alternative currency. Do you guys have to sort of hedge your position a little bit on the currency fluctuations as well? Or does that not phase you guys too much?
Well typically yeah, everything comes down, it's all doable. So someone wants to play, you know, paying USD and then convert, it's quite easy to convert to a different currency. So most of our business is done in IUD here domestically, as you can imagine. But when it comes to golden silver, the cost to buy the physical metals and the cost of storage is quite minimal. So obviously there can be some currency conversion costs, but that when you factor everything in together, it's quite, it's quite possible.
No, I can remember once upon a time actually having someone that was purchasing gold here in Australia, and then they would sell it in Europe. And so part of their issue was that they had to basically do a hedge position on the Euro Aussie conversion so that no matter what, how long it took for the gold to get from Australia to Europe, they wouldn't get, you know, sort of short changed on the actual physical value of golden case. It was a fluctuation Justin, the currency side, but that seems to be really arbitrary when we consider how much we've seen gold and silver fluctuate in 2020. And now again, in 2021, do you have any thoughts about what's going on with gold pricing and silver pricing over the last sort of year?
Yeah, sure. If you go back to the start of the platelet crisis, back in early 2020 both metals were sold off with basically everything at that time. You can remember the chaos in equities
And a lot of fun on the desk, shortening positions all the way through pretty short everything. Yeah, so they, they found a pretty convincing bottom during that sort of February, March, 2020 Mark. And then both metals had a really good calendar year. So gold in Aussie dollar terms was up 13% roughly silver was up about 34% for the calendar year. So if you think about, you know, from a long-term perspective of our clients holding the metal last year was definitely a great year for them. What's happened now is after peaking in about sort of August of 2020, the gold prices come off again. You've seen bond yields start rising, that's put pressure on the gold price and you've seen some money for Nevada gold. There would have been a lot of profit taking after such a ramp as well. So currently we're in a bit of a downtrend and we've got investors that are kind of like trying to pick the bottom at the moment for gold, assuming that we're going to turn around, but that's where we are at the moment. It's after such a massive year for 2020, it does make sense for the price to ease back a bit. Okay.
Absolutely. I mean, I've actually seen just in the last 24 hours that Warren Buffett has sold his taken Barrack mines. So we're likely to see a little bit of a fall down on that front in my belief. Now, when it comes to goal, what do you have a price in mind that you think is reasonable? Because if we actually look at what goes on with gold over 5,000 years, both gold and silver and 5,000 year old asset classes. And right now we're at about a 64 to one ratio on that gold to silver ounce. And you know, previously last year, I think the peak was about 124 to one. Now during historical, if we put an average on it, it's actually closer to 16 to one as the sort of at that or the gold standard, which I think I'm allowed to say at this point in time now, if that's the case, what do you think that one of these could be overvalued or one is undervalued? Did anything along those lines that sort of makes a little bit of sense? Yeah.
When you think about the gold silver ratio historically if you look back, as you said, 16 to one, if you go back far enough, it is around that as an average. I tend to look at it like over the last sort of 30, 40 year period, because if you look at that period, it's kind of a decent chunk there where you've got all the technology when it comes to mining and so forth, and that's a pretty long-term sort of range. And if you look at that range, the average for the gold silver ratio is closer to around between 40, 50 to one. And that would be my sort of target of where I would expect the ratio to get to again, during this cycle. So what you see is during a bull market in precious metals, it usually starts with gold and then silver usually follows after and plays catch up. So like we saw recently, you know, gold up last year, 13% silver, up 30% after such a, you know, kind of terrible period for civil performance in the previous years. It makes sense for silver to kind of come and outperform gold over the next few years. So that's the way I see it. I don't know if the ratio will get back to six 16 to one, but I mean, if it does, it's going to be a tremendous bull market.
Well, in my mind, when it comes to those 16 to one ratio, what you've said is actually stood out to me, it's quite profound where, you know, we should really focus on the most relevant parts of history. We've got 5,000 year of this asset class, but the technology has changed enough to warrant or circumstances have changed enough to warrant the idea of looking at maybe a reduced focus or a smaller scope. Now, do you find, I mean, obviously if you're thinking that there's going to be a lagging side from silver to sort of start coming up a bit here in this instance, you have a bit more of a preference to hold solver personally, and then what you do gold. Yeah. And is there more than just that as a reason, or do you have some other side of it?
There's a few reasons to like silver at the moment. It's getting a lot of, it's getting a lot of attention in the media. Yep. There was recent articles around the silver squeeze and, and that sort of thing, but I think the, the more broader picture for silver one, you've got the ratio there, the historic sort of ratio where if that reverts back to the main, then obviously, so it was going to play catch up the goal. Second of that though, you do have a lot of tailwinds for civil war when it comes to industrial demand over the next few years. If you look at solar PV production silvers using solar panel panels, obviously. So that's a big driver for industrial demand. If you look at the the projects that are coming up, you've got in the U S you've got trillions of dollars now committed under Biden for renewable energy spins. You've got, China is a massive solar producer over the next few years. You've got, you know, another one is in Brazil, a massive solar plant they're building. So you've got industrial demand for solar PV. You've also got industrial demand for electric. The silver is used a lot more on electric vehicles than it is in the older combustion. And
Particularly with lithium batteries and all those sort of things as well. You see that with Tesla growing, you see a lot of car makers now changing from that ice, you know engine to newer electric vehicles over the next five to 10 years. So people, if you think it's silver as like a really long-term investment, the next five to 10 years look quite bullish from an industrial demand perspective.
So can we consider silver to really be more of an industrial store value rather than a precious metal in comparison to what we say with Gold?
Yeah, you can. So, so it was more of both the way I see silver is both a commodity and a currency or, or, or is money. It isn't monetary asset people, people hold it as a store of value similar to the gold. But because of the fact that gold doesn't really get used up in industry it's more of, as you mentioned, a 5,000 year old currency that you can hang on to your whole lifetime basically. Right. silver does have that element of industrial demand that affects the price. So but that's why it's interesting. I think it's everyone should take a really good look at silver for the next few years, I think. Yeah,
Absolutely. So, I mean, really at the end of the day, we've kind of got silver as being more of an industrialized product. What are some of the uses that we might find in gold?
Yeah. So gold typically is if you look at the market and broke it down about a third of gold market is used in Jordan. So particularly like those, you know, India and China and that sort of thing, a lot of the gold demand that comes from those countries is actually for the jewelry products and that's how they store their wealth. They have quite low cost of production for jewelry. They can buy it relatively close to the, to the spot price. So you've got the whole jewelry market that makes up a decent chunk. Second to that. You've got a central bank demand for gold. Now, lots of central bank to meet demand over the last few years for gold because they look around at currencies and, you know, you are at risk if you're holding a, a Fiat currency for over the long-term, right, for 40 years because you've got inflation, they're always losing value. So gold plays a big role in central banks reserves. So you've got that demand factor. And the the other one is just investment demand for gold, really bars coins and that sort of thing.
So if we were to think about gold, particularly from that central bank perspective, where they are storing huge amount and huge quantities of gold, the traditionally there've been, you know, the more stimulus they start to throw out the more they want to absolve that golden Cape of storage of it. And it's not usually until they start tapering off on that stimulus that they sought offloading it because they want to start investing elsewhere. Now, do you see that with what we're seeing in the US right now with stimulus coming in left, right. And center, and Biden's new $1.9 trillion stimulus package that at some stage once the money, so that does eventually draw it, which at this stage, we're still in a sweet spot for markets, but does that mean that sweet spot is going to remain for gold as well? And is there concern from, you know, the gold side of, and the value of gold a store that when it does taper off that we might see a decline in value, or do you think it will still continue to rise because there'll still be that demand to offset protection against currencies?
Yeah. I think talking about central bank demand over the next few years, one of the interesting things to look at at the moment is the way that us bonds are selling off. Yes. So, and you've got to break it down by each central bank and look at them individually. So I think we're going to continue to see central bank demand from China and Russia in the, in the lie, because they look at it and go, actually, you know what, I'm not going to hold U S dollars. I'm not going to increase my us dollar holdings. I'm more happy to increase more gold holdings during this time. If they think inflation is going to start coming up again. So, I mean, this is where
A lot of the conversation has really been in the past week has been around the idea of the more bonds rise in value. The more we want to see a risk on based asset happening. So, you know, gold is a Haven of sorts. Is that something that you imagined as being still here tomorrow? Or is it something that, you know, we are going to end up saying, obviously if you can get a return or a dividend or a yield from a bond, then naturally it makes sense to sort of go after that, as opposed to keeping a store in value, which really on the gold side of things becomes a bit of a speculative asset class. So, you know, how do we sort of make that picture and how would people who might be investing in it want to think about that? Yeah,
The way to think about goal moving forward is, well, we've seen it come off in, in the recent months due to bond yields rising. I think one of the most important things to really follow is, is, is inflation. And the thing is inflation. Once it starts, it's very difficult to control and we're kind of seen that creep up a bit. You've got all this stimulus going on, you've got the, you know, you've got the governments yet. They're spending a lot more than what they're taking in, in tax revenue. You know, government deficits are going through the roof. So if you look at the long-term picture, you've got this huge build up in debt, right? Huge build up in corporate debt, a huge buildup in government debt out. A lot of that, the only way to, to, to pay for that is to monetize the debt. And that is to basically have the central banks come in and buy those government bonds and essentially destroy the purchasing power of the currencies that they're nominated in. So I think the story around owning gold hasn't changed at all. And I think it won't change over the next sort of 10, 15, 20 years, or however long investors are willing to hold it. So, yeah, it's, it's still a safe Haven after 5,000 years. So I think it'll be for the next thousand years.
Thank you very much for your insights today, John, I am looking forward to having a much deeper dive into the physical realm of gold and I'm sure many of our viewers are going to be as well, but here's Felipe. It looks like he's going to try and lock me in the volt today, but I'm hoping I don't have to be worried about that too much. I'll try not to look here, but it is time for the vault to close. Okay. Brilliant. Well, thank you very much for all of your assistance today, guys, on getting into the nitty gritties of gold and the vault itself now, naturally, anyone who would like to get in contact with Felipe or John, I'll make sure their contact details are available for you at the end of this video, so that you can have a look and maybe talk to them about getting some physical gold or silver for yourself. Have a great time. And I look forward to speaking to all again,
Thank you.
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