By Dave Brown – Exclusive to Gold Investing News

Question: What do a Wall Street banker, a US Federal Reserve official and a jewellery retailer have in common these days?

Answer: All three are happy to learn that US consumer confidence has recovered more than expected in August as fears over inflation eased.

The actual level of consumer confidence for August compiled by the Conference Board came in at 56.9, beating the street consensus of 53.0. The improvement in consumer sentiment came during a month when oil prices retreated further from July’s record highs. With consumer spending accounting for more than two-thirds of the economy, the markets are eager to learn what consumers are feeling and how they might act in the near future. The higher the level of confidence about the economy and their own personal finances, the more likely they are to spend, and this provides a data point to analyze the health of the economy.

The spot price of gold climbed to US$827.80 per troy ounce as a gain in energy costs on Monday, created a revival in demand for the precious metal. In an interview with Bloomberg, a London based UBS metals strategist, John Reade said,  “Over the past three trading days, the dollar has regained pretty much all the ground that it lost over the preceding week, but gold has held above $800 despite this strength, supported by extremely strong demand for physical gold.” Continuing with a positive outlook for the industry, Mr. Reade forecasted that, “gold is positioned for a sharp move higher, although for this to happen, the dollar and probably crude will have to cooperate”.

Echoing the optimistic sentiment for gold prices, the Credit Suisse precious metals team issued a research report on Monday indicating that they are expecting the gold price to average well above US$1,000 per troy ounce beginning in 2009, driven by the combination of continued physical supply constraints, a sharp slowing in Central Bank gold sales (and perhaps a shift to buying in the coming years), and global cost pressures.

Company news

On Monday, Gold Fields Ltd. (JSE: GFI) announced a 12 per cent decrease in attributable gold reserves to 80.5 million ounces in June 2008, versus 91.6 million ounces in December 2006. The statement was not encouraging to investors as the company was not able to replace depleted reserves. In addition, input cost increases and their impact on cut-off grades had a negative impact on reserve replacement, despite an increase in the average gold price used in the reserve calculations.

The markets did not seem affected by the news flow, as Gold Fields’ shares closed the session on Tuesday at US$9.10, a 4 per cent increase over the previous day’s close. The South African-based mining company has a market capitalization of US$5.9 billion, and possesses an assortment of mines operating in South Africa, Ghana, and Australia as well as a partnership in Finland and precious metals programs in Africa, Austral-asia, Europe, North America and South America.

On Tuesday, Rio Tinto (LSE: RIO, ASX: RIO) reported record earnings and cash flow for the second quarter of FY2008. The record net earnings of US$6.9 billion, is a 113 per cent increase over the reporting period for the first half of last year.

Rio Tinto is the world’s second-largest mining company possessing a globally diversified portfolio of operations with a primary focus in North America and Australia. The company is the world’s largest producer of aluminum, the second largest producer of iron ore and a top 5 producer of alumina, uranium, mined copper, export thermal and coking coal, and diamonds.

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