With the markets yesterday moving to factor in what appeared to be a breakdown in trade talks and a delay in a signing date, the developments overnight certainly catch the markets by surprise.

Fortunately for the bull camp in gold and silver the markets in general have not fully embraced comments from China indicating that tariffs will be unwound on both sides of the Pacific in a phased approach, perhaps because news that the signing of the deal appears to have been knocked back to December and anything can happen over the next month.

On the other hand, we see the overnight news as a development that could push December gold into a downside breakout. In fact, global equities are giving off signs of a potential big risk on session and any US confirmation of progress in the talks could result in a wave of economic optimism.

Adding insult to injury for the bull camp is news that gold and silver ETFs reduced their holdings with gold funds selling 91,646 ounces. Silver ETFs also reduced their holdings by 135,440 ounces. In keeping with the disappointing flow of demand news over the past two weeks, it was noted overnight that Chinese central bank buying in October halted a 10-month pattern of purchases.

In yet another negative demand-side development the markets were presented with expectations of a very sharp 46% decline in Indian October gold imports. Fortunately for the bull camp, a portion of the slackening Indian demand news has been flowing to the market for the past week.

With the last COT positioning report in gold registering a net spec and fund long position of 328,000 contracts and the fundamental headlines clearly shifting negative, further long liquidation selling should be expected ahead.

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