Gold edged up on Thursday after China’s CPI slowed to a 30 month low of 1.8% in July, factory output plummeted to a 3 year low and these clues signal more QE from China in the near future.
China replaced India as the world’s top gold consumer at the end of 2011. China’s gold inflows from Hong Kong increased 6 times for the first 2 quarters of 2012.

South African mining output rose by 4.2% in June, the most in 13 months, and yet South Africa’s gold output fell by another 4%.
Further signs that geological constraints and peak gold production continues to take its toll on South African gold mining output.
Production of non-gold minerals was 5.3% higher, Statistics South Africa said. The increase in total South African mining output was aided by a 31% increase in iron-ore production, and a 24% gain in nickel.

From Goldcore:

Today’s AM fix was USD 1,612.75, EUR 1,307.46, and GBP 1,029.79 per ounce.
Yesterday’s AM fix was USD 1,607.00, EUR 1,298.90 and GBP 1,030.33 per ounce.

Silver is trading at $27.93/oz, €22.79/oz and £17.94/oz. Platinum is trading at $1,415.75/oz, palladium at $583.80/oz and rhodium at $1,060/oz.

Gold edged up $1.20 or 0.07% in New York yesterday and closed at $1,612.80/oz. Silver dipped to $27.70 then hit a high of $28.25, then retreated and finished with loss of 0.32%.

Gold has been up and down insignificantly in Asia maintaining a price near yesterday’s close in New York and is trading near $1,612/oz at the open in Europe.


Cross Currency Table – (Bloomberg)

Gold edged up on Thursday after China’s CPI slowed to a 30 month low of 1.8% in July, factory output plummeted to a 3 year low and these clues signal more QE from China in the near future.

China replaced India as the world’s top gold consumer at the end of 2011. China’s gold inflows from Hong Kong increased 6 times for the first 2 quarters of 2012.

India’s gold demand has been slow even during the festival season as rural buyers, who account for 60% of the gold demand from India, are holding their cash instead of buying the yellow metal.  Since a lack of monsoon rains could damage their crops they are waiting on the sidelines.

The waiting game is still being played as investors are waiting for the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming at the end of August.

Gold trading has been sluggish as many traders are waiting for more signals from central banks, many are off on holidays or enjoying watching the Olympics.

Gold futures volumes hit the 3rd day below 100,000 contracts, its lowest streak since December 2010. Open interest in gold futures hit its lowest level (388,254 contracts) since September 2009. When trading volume is very low, individual trades can have a large impact on determining gold prices as there are fewer players to accommodate the institutional order size.


USD Currency Ranked Returns, 12/30/11-08/09/12 – (Bloomberg)

South African mining output rose by 4.2% in June, the most in 13 months, and yet South Africa’s gold output fell by another 4%.

Further signs that geological constraints and peak gold production continues to take its toll on South African gold mining output.

Production of non-gold minerals was 5.3% higher, Statistics South Africa said. The increase in total South African mining output was aided by a 31% increase in iron-ore production, and a 24% gain in nickel.

Production of platinum group metals rose 4.8% in June – PGMs have the biggest weighting in the index at 27%.

Platinum’s price increase, the first increase in platinum production in a year may have been due to the nation’s biggest platinum mine ramping up production after a strike.

Impala Platinum Holdings Ltd., whose main Rustenburg mine was halted for six weeks at the start of the year by a battle for control between labor unions, said the operation averaged about 90 percent of capacity in June according to Bloomberg. The strike at the operation cost Impala, the second-biggest producer of the metal, more than 120,000 ounces of output, it said May 29.

Extremely rare and precious platinum, used in devices that cut car emissions and to make jewelry, retreated 18%  in the last 12 months to $1,409/oz today.

South Africa has the world’s biggest reserves of the metal – well over 80% and resource nationalism could lead to higher platinum prices in the coming years.

Platinum is a tiny, tiny market vis-à-vis the gold market and especially vis-à-vis equity, bond and currency markets and even a little allocation by international investors to platinum could result in markedly higher prices.

Dennis Gartman has done another about turn and is again bullish on gold but nervous about the short term (see news). We agree with Dennis with regard to being bullish on gold in the medium and long term and are nervous about one last sell off prior to a resumption of the secular bull market.

Where we differ from Gartman is that we do not believe that the majority of investors (and even speculators) can profit from speculating on short term price movements and from trading in and out of positions.

Indeed, we believe that the costs to buy and sell and risk of being out of position when prices are rising means that prudent investors should adopt a “buy and hold” approach to owning gold and should own the safety of physical gold coins and bars (1 ounce format is best for divisibility and liquidity reasons) rather than derivatives, ETFs or futures.

For breaking news and commentary on financial markets and gold, follow us on Twitter.


GBP Currency Ranked Returns, 12/30/11-08/09/12 – (Bloomberg)

NEWSWIRE
(Bloomberg) — HSBC Says PGM Production Cutbacks to Buoy Prices Through 2013
Low platinum-group metals prices are causing production cutbacks, which should buoy prices this year and next, HSBC Holdings Plc said in a report e-mailed today.

The bank cut is 2013 platinum forecast to $1,625 an ounce from a previous estimate of $1,825 and reduced its palladium outlook for next year to $750 an ounce from $825.

(Bloomberg) — Gold ETP Holdings Climb 8.2 Metric Tons, Most Since Feb. 29
Gold holdings in exchange-traded products backed by the metal rose 8.24 metric tons to 2,411.72 tons, the biggest gain since Feb. 29, data tracked by Bloomberg showed.

(Bloomberg) — World Food Prices Jump as U.S., Russia Droughts Spark Crop Rally
World food prices rose for the first time in four months as droughts damaged crops from the U.S. to Russia, sparking a record rally in corn and soybeans.

An index of 55 food items tracked by the United Nations’ Food & Agriculture Organization jumped 6.1 percent to 213.1 points in July from 200.8 points in June, the Rome-based agency reported on its website today.


EUR Currency Ranked Returns, 12/30/11-08/09/12 – (Bloomberg)

NEWS
Gold inches up; investors await policy clarity – Reuters

Brent stays above $112 ahead of China economic data- Reuters

Gartman: Gold Traders at War & Decisive Battle Imminent – CNBC

Gold Climbs As China’s Inflation Cools, Boosting Stimulus Hopes – Bloomberg

COMMENTARY
Gold to Rally Above $1,900 by End 2012: HSBC – CNBC

Gold QE -  Financial Times

PIMCO’s Gross says cult of equities dying – Futures

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