Gold is marginally higher today but has fallen to one month lows as markets await the ECB interest rate decision. The ECB is expected to cut by 0.5% today and that has put the euro and gold under pressure as the dollar has strengthened in recent days. However, the deteriorating outlook for the US economy as seen in the very poor retail numbers yesterday (sixth monthly fall) will likely see the dollar come under renewed pressure in the medium term. The sea of red ink and fiat currency in extremis is leading to massive budget deficits in debtor nations and this is contributing to continuing safe haven demand for gold. This demand is broad based with demand coming from all sections of society – from middle class housewives worried about their savings to hedge fund managers worried about government defaults and a systemic crisis. Investor demand remains very robust as seen in the ETF gold holdings continuing to rise to new records. The selloff in recent days has seen demand in India pick up as expected and this suggests that gold is unlikely to fall much below these levels. This is especially the case as supply remains anaemic at best. The world’s second largest producer of gold, South Africa (close 2nd to China) saw gold output down 8.7 percent yr/yr in November. This is due to power supply problems with Eskom the national power utility which suffered a near collapse in the electricity grid in January. South African gold output has been falling since 1970 when annual production was over 1,000 tonnes. Last year South Africa produced 272 tonnes of gold. South African gold output fell to its lowest level in 84 years in 2006 because of declining mining grades. Production in 2006 was 275,119kg in 2006, some 7.5% lower than the previous year. The last time South Africa produced less than 260 tonnes of gold was in 1920.It is estimated that South Africa’s full year output could be as much as 1 million ounces lower (over 30 tonnes) in 2008 than it was in 2007 which is another factor should help gold regain the $1,000/oz price level in the coming months.