Gold and silver were higher overnight as they continued to consolidate inside the extremely wide ranges from August 13th. This follows a two-day setback in which a "risk on" mood developed in the markets following supportive measures by the Peoples Bank of China and the German government and hints of a move by the ECB next month.

The long term trend still seems to favor gold and silver, especially if we are moving to an era of lower rates. An argument that was made by fund manager Mark Mobius late yesterday, who cited prospects for easier monetary policy from the Federal Reserve and other central banks to support growth that's been impacted by the trade war between the US and China. He also suggested that the increasing use of crypto currencies will boost demand for hard assets like gold.

This week is light on scheduled data, so the market will be looking to the FOMC minutes release on Wednesday and the Fed's Jackson Hole symposium on Thursday for direction. The question on everyone's mind is whether Fed Chairman Powell will pave the way for a 25-basis point cut (or more) in September.

The Bundesbank has warned that Brexit could put the German economy into recession this fall, and that only increases the pressure for the ECB to cut rates.

Another supportive factor to gold is central bank buying, and data released overnight showed several countries increasing their gold reserves in July: Kazakhstan raised gold holdings by 150,000 ounces, Russia +390,000, Mongolia +40,000, Argentina +220,000. Other countries increasing in June included Qatar at +250,000 ounces and Belarus +50,000.

Indian jewelry merchants are worried about much slower gold sales this year due to high prices, high taxes and an uncertain economy. One analyst stated that Indian gold demand usually reaches 400 tonnes in the second half of the year, but this year it could be closer to 300 tonnes.

Exchange-traded funds added 79,918 troy ounces of gold to their holdings in the last trading session, bringing this year's net purchases to 6.58 million ounces, according to data compiled by Bloomberg. This was the fourth straight day of growth.

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