Morning Gold Market Report 8/31

Statistics: London Gold Fix $1,657.75 +$0.75 LME Copper Stocks 229,900 tons -275 tons

GOLD MARKET FUNDAMENTALS: (6:00 AM CST) December gold inched higher overnight and trade sentiment this week has clearly shifted toward the ebb and flow easing talk from the Bernanke speech today. The bar is set fairly high, so Bernanke will have to acknowledge the prospect of easing in the September FOMC meeting or physical commodities like gold could be disappointed.

With European unemployment reaching a new all time high level overnight and German economic readings softening earlier this week, the drag from slowing outside of the US might be pushing the US Fed toward more easing even if recent US economic news has been slightly positive. With a former BOE member calling for ECB easing again overnight and the ECB meeting looming next week, that could provide a measure of support under gold today.

Gold might also be getting some support from news of increased gold derivative inflows this week and it is also possible that gold is getting a lift from news that the head of the Bundesbank might retire, as that individual has been aggressively opposed to the EU bond buying scheme.

Not surprisingly, the Euro is higher and European equities have started out on a positive track today. This could be from the calls for easing, and perhaps from the potential management change at the Bundesbank. News of which appears to have glossed over the weak Euro zone economic readings.

Comex Gold Stocks were 11.026 million ounces up 39,527 ounces. Gold stocks have declined 12 of the last 20 days.

OUTSIDE MARKET DEVELOPMENTS: (6:00 AM CST) Chinese equity markets were lower again overnight off of bad earnings and fears towards the upcoming PMI report that is scheduled for release over the weekend. Some equity market measures in China have now seen negative action for four consecutive months!

European stocks started higher this morning, off of more calls for ECB easing and perhaps off hopes of supportive dialogue from the US Fed later today. US stocks have also started out higher in anticipation of the Bernanke speech today.

Out from the US today, is Factory Orders and the Consumer Sentiment Survey from University of Michigan but the focus of the US trade is likely to be locked onto Jackson Hole.