Executive Chairman Philip Klapwijk appears regularly at international conferences and seminars, and his articles have been widely published. All the company’s analysts travel regularly and extensively to stay in touch with GFMS' unrivalled network of contacts and sources of information around the world. GFMS is the world's foremost precious metals consultancy, specializing in research into the global gold, silver, platinum and palladium markets

Dr. Alper: This is Al Alper, interviewing Philip Klapwijk, Executive Chairman of GFMS, a company that is a consultancy for investors and institutions on precious metals and other commodities. Philip, I wonder if you could tell me a little bit about your background.

Mr. Klapwijk: Well, my background is really that of an economist. When I came out of post-graduate studies I worked for Consolidated Gold Fields, which was the old, long standing British mining finance house. I worked for them as an economist, ended up as the company’s group economist, and I got a bit involved with the work

for the annual gold market survey, the Gold Survey that they used to produce back then. When Consolidated Gold Fields got taken over, the Gold Survey which they produced was put into a new vehicle called GFMS and I joined GFMS at that company’s inception in 1989, and I’ve been with GFMS ever since. I’ve been there almost 20 years now, and eleven years ago we had a management buyout and the company is now privately owned. We were owned previously by Gold Fields, Ltd., but we now have been private for the last seven or eight years, and I’m the Chairman of GFMS.

Dr. Alper: Now, could you tell me what the purpose of GFMS is and how you operate, what type of clients you have?

Mr. Klapwijk: GFMS is a commercial consultancy that looks at precious base metals and steel. We have a team of 19 analysts and consultants who look at these metals. We have a methodology which is very much bottom up, particularly for precious metals, where we spend a lot of time out in the field talking to consumers and producers and traders of these metals to get first hand information, which helps us create statistics; basically the supply and demand for these metals. We use those statistics extensively for our work; for forecasting work, for our annual publications and for other market studies that we do.

We’re best known, I guess still, for the annual gold and silver market surveys that we produce. And, in the case of the gold survey, this report has been going strong now for over 40 years. That’s still very much our flagship publication, but our services go well beyond that to reports on all of the precious metals and on base metals and steel.

Our target market is largely the professional market; consumers, producers, intermediaries such as banks and brokers of precious metals, but we’ve also noticed in recent years a growing interest from the investor community, be that institutional investors or private investors.

Dr. Alper: Well, that’s great. What are your thoughts on what’s happening in the gold and silver and precious metals market?

Mr. Klapwijk: Well, I think we’re seeing a lot more interest in these markets. There’s a lot more of a spotlight these days on precious metals. Investor commitment to these metals has certainly grown exponentially in recent years. Price action has obviously contributed to that; prices have tended to be strong, trending upwards albeit with a lot of volatility. That has provided a very interesting asset class for investors to get involved with.

In terms of the markets, we don’t really have any particular starting point in terms of being bullish or bearish. We try to look at these markets dispassionately and objectively. We’ve been pretty bullish on precious metals over recent years. We remain cautiously bullish on precious metals at the moment. I think we feel there are certain indicators out there which are flashing that we are perhaps reaching a sort of mature phase in the gold market. But then, there are other things that we would take into account, which make us believe that perhaps there are still some legs left to these bull markets in precious metals.

Dr. Alper: I know almost all of these experts are advising putting some percent of monies in gold, either in the bullion or in the gold mining companies or silver, too. What are your thoughts on that?

Mr. Klapwijk: Well, I think given the very unstable and unprecedented difficult economic and financial situations we’re in these days, outside wartime I think, it’s probably advisable for investors to certainly consider precious metals and having part of their portfolio allocated to precious metals. Not only I think is there some opportunity to see price gains in these metals, particularly if you time your purchase right in terms of short term cycles preferably coming in of course at the bottom, but it’s also a form of insurance for your portfolio if things really go badly wrong.

It’s possible that we will see a major inflationary outcome down the path. We could see a very much weaker U.S. dollar. And if you do see that almost like sort of systemic breakdown, which we got very close to towards the end of last year with the collapse of Lehman Brothers, gold and silver in particular, arguably also platinum and palladium, are perhaps metals that --- it’s not a bad idea to have exposure to.

I think one has to be careful here. In the long run you could see some major correction in prices of these metals. They are being supported very much against the grain of their fundamentals by investor inflows, which are increasing in size. But, that doesn’t mean that you couldn’t see those prices go up further for particularly gold and silver, perhaps. And, therefore having exposure as I said, particularly in terms of portfolio insurance, is not a bad idea.

Dr. Alper: Now, how do you feel about the precious metals compared to, like the base metals?

Mr. Klapwijk: Well, I think a lot of the base metals have been sold off very aggressively. Some people have been looking at say, nickel against gold, and saying that nickel’s the better value, particularly if you believe that we could see economic recovery in the not too distant future, and that you could get some outperformance of base metals against precious. I have some degree of sympathy for that view. I think if one picks and chooses, base metals can offer pretty good opportunities if you buy the recovery story.

Dr. Alper: So, tell me a little bit about the literature that you publish, and the studies.

Mr. Klapwijk: Well, we publish a range of market reports. We publish everything from weekly and monthly reports that provide forecasts; for example, going out over the next three months and review what’s happened in the markets – price action, supply/demand data over the past month or so. We also have quarterly reports which provide three year forecasts and we have annual surveys which cover in very great detail the supply/demand story for the major precious metals.

Our group also does quite a lot of bespoke or tailor-made research for our clients. We can do special studies of certain aspects or sectors of the market if you want that.

Dr. Alper: Well, thank you very much. I appreciate you sharing your background and your company’s background information and your ideas for our readers.