FSU Contributor: "Silberinfo Interview with Graham Birch" 07/13/2007

SILBERINFO INTERVIEW WITH GRAHAM BIRCH,
Manager of Merrill Lynch Gold & General Fund
by Silberinfo Team
July 13, 2007

silberinfo:
Please tell us a little bit about your background.

Graham Birch:
BSc and PhD in Mining Geology. Started working as a mining analyst on the sell side in 1984. Switched to buyside in 1993. Head of BlackRock Natural Resources Team in London

silberinfo:
Why is an investment in gold and gold stocks a good idea right now?

Graham Birch:
Gold and gold shares are in a gently rising trend. However from time to time it enters into a consolidation (as is the case now). These are good times to pay attention.

silberinfo:
There are people saying that the price of gold is being manipulated. Do you agree?

Graham Birch:
No. Obviously Central Banks interfere in the gold market a bit but this is not manipulation in my view.

silberinfo:
In your fund, you focus on gold stocks. Is Silver of any interest for you too?

Graham Birch:
We quite like silver but there are not so many ways for us to play silver through equities. Silver companies tend to be rather expensive in our view. The largest silver investment in our portfolio is the Mexican mining company Industrias Penoles – the world’s number one silver producer.

silberinfo:
Would you recommend a friend to invest in gold stocks, in derivative structured products or physical gold itself?

Graham Birch:
Our gold equity fund has clearly outperformed gold bullion over the long term.

silberinfo:
What criteria has a company to fulfil if they want to get you as an investor?

Graham Birch:
We need to earn a return so companies have to show us how we are going to make money in the long term. Quite a lot of precious metals companies seem to produce more shares each year than metal.

silberinfo:
Are there regions where you don’t invest with your fund, because of political, social or environmental reasons?

Graham Birch:
No. We go where the gold is.

silberinfo:
The obvious question – where do you think that the present correction on the precious metals markets comes to an end?

Graham Birch:
Impossible to say but the correction must surely be very mature now.

silberinfo:
There are analysts that predict a break in the present bull market cycle of Gold. Do you agree? If yes, why? If no, why not?

Graham Birch:
No. The supply is reducing from mines and the demand is rising from investors and jewellery. This is a very favourable pattern.

silberinfo:
Do you agree that the HUI-Index and other indices on precious metals stocks often tend to precede the performance of the gold price itself? Why?

Graham Birch:
No it is a coincidence.

silberinfo:
Why is an investment in gold stocks a good choice, knowing that they also have increasing (energy and worker’s) costs?

Graham Birch:
Gold stocks have growth potential and financial gearing.

silberinfo:
What do you think about the US$? What effects will that have on the price of gold?

Graham Birch:
It is just one of many factors which affect gold. Generally a weaker US$ is favourable.

silberinfo:
Do you think that one day, the possession of gold will be forbidden, as it was in the US for a long time?

Graham Birch:

Very unlikely. Investors are not so easy to control these days.

silberinfo:
Do you believe that some kind of gold standard will be/has to be re-established in the future?

Graham Birch:
Possible – especially in the Islamic regions.

silberinfo:
What role in the gold market will Asia play in the future, and how will it affect the price of gold?

Graham Birch:
China will see steady growth in jewellery demand.

silberinfo:
The popular stock markets are valued quite ambitiously, and there are housing bubbles in parts of the world. What effect would a broad stock market correction/a bursting bubble have on the prices of gold and silver? What effect will that have on the gold stocks?

Graham Birch:
Anything that makes people fearful tends to help gold. However these are just one or two factors.

silberinfo:
What development of the interest rates do you expect, and how will it affect the price of gold?

Graham Birch:
Real interest rates are important. High real interest rates are bad for gold. However first we have to believe the inflation numbers.

silberinfo:
What do you think about the ETF’s on precious metals?

Graham Birch:
ETFs are a good thing for investors.

silberinfo:
What are your favorite companies in the gold and silver sector?

Graham Birch:
These are not recommendations. However I think that the Russian gold mining companies are looking oversold at the moment. For example Polyus, Polymetal and Peter Hambro Mining. In silver it is really only Penoles. Hocschild may be oversold. Out of the silver explorers Mag Silver shows some potential

Mr. Birch, we thank you for your kind answers!

www.butlerresearch.com

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Silberinfo Team
Dubai, U.A.E.
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