In retrospect, we see the lack of a sustained rally in gold in the face of significant uncertainty and in the face of one of the largest single day rallies ever in crude oil, as signs of an overbought market. While it is possible that gold will draft support from the anticipation of a 25 basis point rate cut from the US Fed tomorrow we would suggest that expectation is already largely factored into the price of gold.

The bear camp will rightly suggest that the Saudi Arabian attack failed to dominate gold and silver prices for long perhaps because the situation has yet to result in a reaction by Saudi Arabia and or the US. In fact the US President has indicated he does not want war with anyone but suggested the US is more prepared for war than anyone else.

However some support for gold prices might be derived from news that the Iranian leader has rejected one-on-one talks with the US and from suggestions from Saudi officials that the drones were made of Iranian military equipment. Another issue that might be prompting some minor long liquidation this morning is the fact that Chinese negotiators have apparently left China for talks in the US.

Certainly the oil price rise helped to lift gold and silver prices yesterday but talk of huge US and Saudi strategic reserves has squelched a portion of safe haven interest from the attacks.

Reuters' total gold ETF readings for Monday showed a 25,173 ounce build in gold holdings, with silver ETF holdings yesterday showing a decline of 2.8 million ounces.

Apparently the gold market overnight has discounted news from the IMF that Turkey and Qatar central banks increase their gold reserves in August with Qatar raising its holdings to a new record level.

While the gold market has not paid that much attention to the ongoing violent protests in Hong Kong, there are reports of investors moving gold holdings out of Hong Kong to safer locations and that could incorrectly send-off signals of softening Chinese demand for gold ahead.

However in the end yet another safe haven story line for gold and silver has been added from the attacks to ongoing investor inflows, ongoing central bank gold buying and from the prospect for US easing later this week.

As indicated in our Monday coverage, Citibank thinks gold could be headed to the $2,000 level because of the prospect of a number of US rate cuts later this year and the potential for negative rates in the US and that clearly increases the importance of the Fed meeting tomorrow.

In other words, the bull camp once again has a very strong list of bullish forces in place. In fact, we see the current condition in gold similar to the condition in early June where gold prices exploded for $200 on the upside with silver gaining in excess of $4.00!

From a technical perspective, we would suggest that gold and silver have somewhat corrected the significantly overbought conditions seen at the beginning of the month, but both markets have obviously burned both futures and cash buying fuel with their summer rallies.

For today gold and silver appear to have fairly close consolidation low support on the charts, but we feel technical signals will take a backseat to fundamental headlines in the coming trading sessions.

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Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete and/or up to date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Financial Services LLC, unless otherwise expressly noted.