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The interview below was copied from the daily issue of MIDAS from GATA: http://www.lemetropolecafe.com/james_joyce_table.cfm?cfid=170590&cftoken=46288065&pid=3129 Protecting Your Portfolio with Gold Edited by Francesco D'Arco Editorial staff Bluerating.com "The price of gold is manipulated by governments. The Bush administration has ignored a document that demonstrates the risk of a banking crisis and if we do not return to the gold standard we will not avoid the risk of inflation. And much less risk deflation." These are some of the theories of Ferdinand Lips in his book Gold Wars. Mr. Lips is a private Swiss banker, a non-executive director of Randgold Resources Limited and of The Afrikaner Lease Limited. He manages a precious metals fund (www.topgoldinvest.com) and in an interview released to Bluerating.com he explains why it is important to have a portion of one's portfolio, 10 to 15%, invested in gold. Q: Why did you select the title of "Gold Wars" for your book?" A: I chose the title "Gold Wars" because the central banks, and in particular the US Federal Reserve, with the help of some of the Wall Street banks, since 1984 have tried to hold down the price of gold. They are still manipulating it today. Q: What do you mean when you say, "manipulating the price of gold"? A: When you speak of the price of gold you have to realize that it's a " political metal." In this sense therefore the price can be considered " governed". Gold is incompatible with the modern financial system. Before August 15, 1971 there was never a period of time in history in which no value was tied to the precious metal. In all other historical periods people could always escape to currency protected by gold. Since 1971, this "escape hatch" has not been possible. The whole economy, monetary and financial, for the last 30 years is a direct consequence of this. The only event that can change this situation is the rapid increase in the price of gold in dollars. At the beginning of the Bush administration, GATA, a private investigative organization, showed to members of the US Congress research that demonstrated the risk of a banking crisis as a consequence of this situation. President Bush has seen the document, but no one has seriously considered the argument and they have gone forward with their politics as if no risks existed. Q: After the Washington Agreement in 1999 the central banks, who were in the process of liquidating part of their gold reserves, agreed not to sell more than 2000 tonnes of gold in 5 years, losing part of their influence on the gold market. The treaty will expire in September 2004. How do you think it should be modified? What benefits has it brought to the gold market? A: The Washington Agreement was realized as a consequence of the European central banks not wanting to see the price of gold fall too much, in other words they did not want to see the value of their reserves fall. Some reliable sources maintain that, if the agreement is not renewed, it will represent an "official" sell of gold. The same sources exclude the possibility of a renewal at a higher level than before. The purpose is the increase the price of gold in an orderly fashion. So far the Washington Agreement has obtained the proposed results. Q: In the last few years some funds have invested part of their asset allocation in gold. In general, the maximum exposure has been equal to 5%. Is this a correct percentage or should this exposure be increased? A: For the US stock market, as well as in Europe, I see a long bear market, probably more than 10 years. It will repeat the situation more of less analogous to the experience seen in Japan. Surely there will be occasional rallies but to better protect your portfolio, everyone should have between 10 and 15% positioned in gold investments. Q: What do you see for the future of the gold industry? Are we at the beginning of a period of strong growth or are there factors that could stop the demand of the precious metal? A: This period is similar to the 70s, when the stock markets were in a bear market and there was an on-going war. During these years there was a strong investment demand in gold because the savers did not trust the stock markets and were looking to protect their savings from inflation. There are now investors that are demanding gold in Japan and India, but in the west the demand is low. The price of gold has recovered from the low-level reached two years ago (252 dollars). In the last few years there has been a certain consolidation of the global gold industry, that has concealed the stagnation seen. Now however the industry has urgent needs of new discoveries. For this reason they must point to areas that have prospects ma that are not yet tapped. Q: According to you, what are the advantages of a growth in the gold industry? In your book you speak of the capacity of the precious metal to stop inflation. How so? A: The actual monetary order is a fraud. It punishes the workers and the pensioners. It is destroying the middle class. Now inflation is not the biggest problem but rather it is deflation. To avoid both, the world must return to a gold standard. The gold standard is the only "honest money." It can restart the world economy at the maximum of its potential guaranteeing the savings and increasing the level of investment. Furthermore, during times of a gold standard, historically there are fewer wars.
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