* Yellen to speak in Jackson Hole at 1400 GMT on Friday
* Asian gold discounts fall as lower prices lift demand
* GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC (Updates prices, adds comment)
By Jan Harvey
LONDON, Aug 26 (Reuters) - Gold edged higher on Friday as markets braced for a speech later in the session by Federal Reserve Chair Janet Yellen that could yield clues on the direction of U.S. interest rates.
Yellen is scheduled to address a meeting of central bankers in Jackson Hole, Wyoming, at 1400 GMT. Top Fed officials have pushed the case for a rate hike in the past week, citing improvement in U.S. data. gold XAU= was up 0.6 percent at $1,329.22 an ounce at 1321 GMT, while U.S. gold futures GCv1 for December delivery were up $7.90 an ounce at $1,332.50. The spot price hit a four-week low on Thursday of $1,317.46 an ounce.
The metal has slid for five straight days, falling on Thursday after U.S. jobless and durable-goods data beat forecasts, and Kansas City Fed President Esther George said it was time for the Fed to raise rates gradually. Yellen retains a neutral tone, in spite of expectations for a clearer signal on rates, gold could claw back some of that lost ground, analysts said.
"More and more market participants are expecting Yellen not to say anything new regarding future Fed policy," Commerzbank (DE:CBKG) analyst Daniel Briesemann said.
"That would lead to disappointment, (and the expectation that) interest rates would remain low for longer, and that would help gold."
Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
The dollar held steady against the euro on Friday, leaving it little changed on the week, as investors focused on Yellen's speech. It could rise sharply, weighing on gold, if Yellen indicates rates will rise sooner rather than later. FRX/
"There is a chance that Yellen could decide that a stronger signal about near-term policy would now be appropriate in light of diminished risks globally and an improved U.S. labour market," HSBC said in a note.
Gold discounts in India hit near three-month lows this week while buying gathered steam elsewhere in Asia as lower prices and festive buying lifted demand for the metal. GOL/AS
Silver XAG= was up 1.1 percent at $18.70 an ounce, after hitting an eight-week low of $18.46 on Thursday.
Platinum XPT= was 0.6 percent higher at $1,074.99 after falling to a one-month low of $1,067.25 in the previous session. Palladium XPD= was 1 percent higher at $690.90.
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