BULLION MORNING - Precious metals mark time, on tenterhooks ahead of Jackson Hole

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Eddie van der Walteddie.vanderwalt@fastmarkets.comBullion Editor+44 (0)20 7264 2489

London 31/08/2012 - Gold was hardly moving during Friday morning trading, as the market awaits Fed chairman Ben Bernanke's speech at Jackson Hole in Wyoming, where central bankers are meeting to discuss the world economy.

The metal was last at $1,658.72/1,659.18, up $3.02 on Thursday's close, having lost $11.28 this week.

On Thursday, bankers gathered in Wyoming for this three-day event to share views on the outlook for the global economy and their collective best response. Bernanke will deliver his much-anticipated speech at 15:00 BST today.

Precious metals investors will be looking for a clear signal that he supports the idea of intervening with a third round of quantitative easing (QE3) to reignite the flickering US economy. He used his Jackson Hole speech in 2010 to signal the launch of the previous round of easing.

Monetary easing has a positive influence on the price of precious metals, boosting inflation while simultaneously weakening the dollar against other currencies. Gold is often used as a hedge against these phenomena.

"On balance we think today’s message from Jackson Hole is likely to be along the lines of 'there will be more QE if it is needed'," FastMarkets analyst William Adams said, but added: "Whether that will be enough to underpin the markets, or even fuel a rally, remains to be seen."

The metals, including gold, are well placed to rally, he said, but with so much talk of stimulus, and so little action, he added, there may be room for disappointment.

The day is busy on a data front. In the US the main releases include the August Chicago PMI, the August Revised UoM Consumer Sentiment index and Inflation Expectations, and July factory orders.

Tomorrow, markets will focus on the release of China's official manufacturing PMI. A weak reading would increase downside risks, but there is a possibility that China will pre-empt a disappointing result with an announcement of monetary easing.

Released so far, the European unemployment rate increased by 10 basis points to a record high of 11.3 percent in July, while the zone's flash consumer price index increased from 2.4 percent in July to 2.6 percent in August.


Despite a lingering strike at Lonmin, the world's third largest platinum producer, the price of platinum briefly broke below the psychologically important $1,500 per ounce level in early trade.

It had drifted as low as $1,496.50, but it has since recovered slightly to $1,506.75/1,516.75 per ounce, up $5.15 on yesterday's close.

Talks between Lonmin and workers taking part in the wildcat strike - which has resulted in the death of 44 people, including two police officers - look set to continue into next week.

The strike has cost the company more than 50,000 ounces of platinum production.

Sister platinum group metal palladium recovered somewhat following recent losses. It was last at $620.10/624, up $5.40 on Thursday's close, but down $31.90 on the week.

Silver followed the rest of the complex higher, it was last at $30.52/30.54 per ounce, up eight cents on the close.

In wider markets, the euro was at 1.2558/1.2559 against the dollar, up 0.005, while the dollar index lost 0.26 to 81.42. Oil is quoted at $111.63/111.68 per barrel.

(Editing by Martin Hayes)

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