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Jessica Cross: Virtual Metals Research and Consulting
Alec Hogg
Posted: Wed, 16 Nov 2005 17:00 | © Moneyweb Holdings Limited, 1997-2005

MONEYWEB: Jessica Cross from Virtual Metals Research and Consulting joins us from London. Jessica, you’ve brought out a thing called the Yellow Book. Why Yellow?

JESSICA CROSS: With much passion, Alec. And it's complements of Fortis Bank. Essentially anyone interested must just contact us. It comes out every six months. It's going to be forward-looking and the data’s available in Excel format as well.

MONEYWEB: Can we put it onto the Moneyweb website for people to download?

JESSICA CROSS: Of course you can.

MONEYWEB: So you don’t have to pay for the Yellow Book?

JESSICA CROSS: Not at all.

MONEYWEB: In fact, we’ll do that now. Barbara Mazaris is onto it as we speak. It's a very detailed document. It also looks ahead to where you anticipate the gold price to be heading – and I don’t want to steal any of your thunder, because gold has been in an upward phase. Are we going to be seeing $500/oz?

JESSICA CROSS: I think we’re going to test $500 before Santa Claus arrives. Alec, there have been amazing things happening in the market, and we always joke that the gold price rallied just after the LBMA conference, which was just completed yesterday. But, beside that you’ve got a relatively strong dollar, so the strength is coming internally from the market. You’ve got a lot of petrodollars growing into the Middle East and filtering through into very, very good jewellery demand, especially into Saudi Arabia. Comex longs, the big specs, are off their peak – about 100 tons off their peak of four weeks ago – and yet the price has still been going on up, which is amazing. There has been a decline in the rate of de-hedging. We’ve got de-hedging for the last quarter at about 31 tons, but still there’s been strength into that. and the IFS data is showing that there’s been sales, central bank sales from Europe of about 56 tons through into October. And, with that, the price has still broken $475 – and that gives you an indication of the internal strength. You know, Alec, I don’t often get excited about the price. I’m excited about the price.

MONEYWEB: Yes, you sound it. But everything you’ve told us is why the price should actually be under pressure at the moment. Yet, as you’ve explained, it's going higher. Where is it coming from?

JESSICA CROSS: Well, this is it. There is obviously this amazingly strong physical base. Primarily Middle East-driven, I’m convinced. But I think you’ve also got the investment longs. You know, you’ve still got the hedge funds in there. And you’ll see when you read the Yellow Book, we’re saying so long as the hedge funds stay committed as they have been, you’re looking for strength. But of course the spanner in the works is we don’t know how long they are going to stay committed.

MONEYWEB: The Middle East – you say you think it's from there, but is there any way of measuring how much of the oil bonanza that is going into that area of the world is now being put into gold, rather than in the past when it would have gone into US dollars.

JESSICA CROSS: Well we talked to people in Dubai, and obviously Dubai is the conduit. And we can tell anecdotally that there is a lot of strength. We talk to them very regularly and that’s giving us some security. But I was also talking to someone here in London who’s associated with one of the auction houses, and she was saying that there’s money coming into things like art work, and that’s usually an indication that there’s plenty of money sloshing about.

MONEYWEB: All right, let’s look ahead 12 to 18 months. We’re going to hopefully have $500 before Santa comers down the chimney. What about this time next year?

JESSICA CROSS: Well, you know, what goes up must come down. And if the hedge funds start to take profit once Santa Claus is down the chimney, you could see some downward pressure. And if you have continued central bank sales, which we expect, and if the de-hedging slows down, which has always been supportive – you know, the greater the de-hedging the more supported the price – that is also going to be a factor that comes away. So we’re looking for this rally, beyond which we expect the price to soften. But you know we [indistinct] the hedge book – we’re looking for an average of about $430/oz, but a lot of volatility around that. And associated with a lot of volatility and excitement in platinum, and we’re looking for platinum to break $1000 very soon. We’ve been looking for that for a while and I think now it's in the offing.

MONEYWEB: Jessica Cross from Virtual Metals Research and Consulting. And even if you aren’t invested in platinum and gold shares, what Jessica’s had to say is extremely exciting for this country because, remember, they are the two biggest export earners for South Africa. Platinum and then gold. And if the prices go up, the country gets more dollars, and if the country gets more dollars it means our economy grows faster.