Gold and silver worked lower overnight, as the safe haven support continued to drain from the market. Friday's COT report in gold showed a new all-time high net long reading of 401,611 contracts for large and small specs combined, and given the ongoing chart damage, stop loss selling could become a self-propagating event.

Chinese central bank holdings increased for the ninth straight month in August, but some traders expressed concern that the fact that they only bought 5.91 tonnes in August (versus an average of 11.75 tonnes per month since December) indicates that China is slowing it pace of buying.

Russian gold reserves reached $109.5 billion at the end of August, up $7.5 billion from the previous month, which should be supportive to gold.

The trade is looking ahead to the ECB meeting this week, anticipating a cut in rates due to Brexit uncertainty. This may be supportive to gold against the euro but not necessarily the dollar. However, some believe that a cut would be a motivator for the Fed to do the same at its meeting next week.

Citigroup now thinks gold can reach $2000 in the next two years, citing the possibility of a global recession and the US Fed lowering rates to zero, unless there is a substantial turnaround in US/China trade relations that change the recession dynamic.

The Chinese state-run newspaper, The Peoples Daily, singled out Peter Navarro for trade "lies" overnight, saying his recent comments are "not constructive at all." This was in response to an interview Navarro gave over the weekend in which he cited China's "seven deadly sins" regarding trade. This resumption of harsh rhetoric is counter to the more optimistic tone that was set last week, and if it builds, it could provide an impetus for gold to regain a positive track.

Gold ETFs are gaining in popularity in India; net inflows in August rose to 1.45 billion rupees ($20 million), the highest since December 2012. Shares in the SPDR gold trust fell by 7.33 tonnes on Monday, and they have fallen by 13.48 tonnes since putting in an all-time high of 895.9 last Wednesday.

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