Good Morning,

Price ranges narrowed and action turned somewhat calmer in overseas precious metals markets overnight. The approach of the long weekend in the US and the imminent release of labour statistics might make for a strange combination on Friday. While some participants will be jockeying for positions -long or short- following the data signal, others will simply be squaring books (and some have already started that process yesterday while 'gone fishing' today) and looking forward to next week and what it might bring.

That said, gold prices remained very near the 990 mark during the early hours, buoyed by a slightly softer dollar (off 0.10 on the index at 78.36) and marginally higher crude (up 0.45 at 68.40 pbbl) and some scattered follow-through buying following the two-day spike in the metal. Indian gold prices reached a record 30,000 rupees per tola and the local market was seen gearing up for a period that is not deemed as auspicious for buying the metal (between the 5th and the 19th of the month).

The e-mails we get from retailers the Gulf region seem to corroborate that which was disclosed earlier this morning; that Abu Dhabi for example saw a 40% drop in  August gold sales. There is one bright spot to report as regards India this morning however; the country imported 3 tonnes more gold in July of this year than that seen in the same month of 2008. Buyers raised their radar following the early June slippage in gold prices that brought values closer to the $900 level by early July.

The focus -as expected- this morning will be on the unemployment data from the US. Expectations are that perhaps as many as 230,000 jobs were eliminated last month - smaller than July's losses, and the smallest such decline since August one year ago. Nonetheless, the overall unemployment rate could bump up to 9.5%, getting ever closer to the projected 10% lagging statistic that many economists and US officials still believe could materialize.

The US numbers will come just ahead of the G-20 meeting taking place over the weekend, and they will underscore the fact that whether it is the US, or Europe, or other parts of the world, the recovery is still fraught with delicate issues and that yanking the stimuli packages too early might engender more pain. At the same time however, officials at the G-20 get-together are expected to present of roadmap of their eventual exit strategies, being fully cognizant that not doing so unnerves markets today, while crating actual problems (inflation for one) down the road.

Gold opened with a minor ($1.50) per ounce loss today, quoted at $990.20 while silver declined 12 cents to start the day at the round figure of $16.00 per ounce. Platinum rose $4 to $1255 but palladium fell $2 to $288 per troy ounce. Players are assessing the odds of a successful assault on the four-digit target, how far beyond it the funds can reasonably push the envelope, and how long-lived the fourth attempt to overcome the number might turn out to be.

Okay, the numbers just hit. Unemployment rose to 9.7% -a 26-year high, and more than was expected. However in August employers shed only 216,000 jobs- a number lower than forecast, albeit is still adds up to the 20th consecutive month of such losses. Initial reaction was only clear in Dow futures, which turned lower following the data release. A flurry of trades hit the metals and currency market floors but it was as yet unclear which direction the day's trend might take.

Much depends at this stage on whether the gold-stocks correlation is still as valid as it showed itself to be in recent months, and whether dollar traders take this as a signal to take the currency to 78 or lower on the index. For all intents and purposes, gold has already apparently made its play as if the statistics had come out on Wednesday. That said, we could still get a fifth day to call an above $1,000 kind of gold day if the bettors have luck and a few other things on their side. At last check, the dollar and equity futures rebounded.

Thus, we go on to record the action for the rest of the trading day. Let's see if the trade in various markets focuses on the August number or the overall number in the labour market. A labour kind of day, before Labour Day itself.

Best Wishes,

Jon Nadler
Senior Analyst
 
Kitco Metals Inc.
North America