Gold prices to consolidate as physical markets come back in - Jessica Cross

Speaking on the Mineweb Gold Weekly Podcast, the CEO of the VM Group maintains that while dollar strength could continue, physical buying could provide a stable base around current price levels.

GRONINGEN - 

Continued strength in the dollar, at least in the short term, is likely to put further pressure on US dollar gold prices but, support from physical markets should help put a base under the fall and help prices consolidate around current levels.

This is the view of VM Group CEO, Jessica Cross who was speaking on the Mineweb Gold Weekly Podcast.

Cross says, the important thing to focus on now, with gold prices where they are is how the various sectors begin to respond to the change

"As we went up and we did so very steeply, the physical markets really did battle; certainly markets like Dubai, which is a conduit for a lot of the Middle Eastern countries and then into the Indian sub continent, went very quiet. There was some scrap generation but very little in the way of new buyers.

"Hopefully this kind of respite in the price will allow those markets to recuperate a little bit. Because at the end of the day we have to have physical coming off the market and those physical areas really do support the supply demand balance in the long run.

She says, physical buying has picked up somewhat and gold coins doing particularly well as well, adding, "if indeed the US is out of recession as people have been talking about then maybe you are going to have a resurgence of jewelry buying, luxury spending coming into 2010 that would be a very nice feature to see - renewed consumer confidence coming in and buying jewelry which was badly hit as the price went up."

Another interesting element within the supply demand balance is the role of ETFs which, Cross says, have been remarkable products that came to market at exactly the right time. She says, while the buying of ETFs has slowed in recent months, as gold prices have risen, you have yet to see lots of people divesting of their holdings.

"That means the sort of investor who is going into the ETFs is a long term holder and thus I wouldn't expect large shorting of ETF holdings. That says very encouragingly that that metal is off the market. So you have these long holdings of ETFs which I believe are very stable holdings and that ergo is supportive of the price "

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