From Ed Steer:


The low for gold on Thursday was at 1:00 p.m. yesterday afternoon. in Hong Kong...which is 13 hours ahead of New York...where it was midnight. From there, gold rallied right into the Comex open, where the usual not-for-profit seller made an appearance until the London p.m. fix. Then it proceeded to rally until shortly after the Comex close. From there, gold got sold off until Globex trading was through for the day. The low in New York came within a dollar of the Hong Kong low. Yesterday's gold volume was light, with only about 108,000 contracts (net of switches) traded.

Silver's path was similar to gold except for two little things. The first, was that the high was set in London at 12:00 noon...7:00 a.m. Eastern...which is the London silver fix. The second little thing, was when the Comex opened, JPMorgan pulled its bids, and we had the usual waterfall decline right into the London p.m. gold fix. This was silver's low price point for Thursday. From there it rallied, and followed the same price pattern as gold until the end of Globex trading at 5:15 p.m. Eastern time.

Open interest on Wednesday's huge price spikes (and subsequent declines) were rather strange. Gold o.i. went up 860 contracts to 29,560...whereas silver o.i . only rose 76 contracts to 91,929. I guess that after spikes like that, one would be inclined to think that the open interest numbers would be a little different...and they were.

But now that options expiry on the Comex is over...we now await first day notice which is next Friday...the 28th. I (and a lot of others) expect gold and silver to blow up any time. If and when it does, it will be of great interest to see if JPMorgan et al are going to short this rally, or just stand aside and let 'er rip. In the graph below, you can see how ferociously that the $740/$750 level was defended for the last 30 days until options expiry was out of the way.

click to enlarge

The World Gold Council's stunningly bullish supply/demand gold news yesterday made no impression on the market...or at least nothing that JPMorgan et al couldn't handle. Like I said, even if a significant percentage of the world's silver and gold production ceased tomorrow...the boyz would be all over the market in damage control mode. The usual NY commentator reports that “GLD added 100,000 ounces to its ‘alleged’ gold holdings.” And in an e-mail from Ted Butler early yesterday morning, he noted that..."the SLV ETF lost 2 million ounces. Based upon price action and volumes, it looks like the silver was taken out, not liquidated." And before I forget...Richard Russell said it again in his commentary yesterday..."The Fed is suppressing the gold price."

The bad news yesterday? Here's a list of headlines...

1) U.S. weekly jobless claims surge to 16-year high (Reuters)
2) Philadelphia Federal Reserve Bank says business activity hit a new 18-year low (Reuters)
3) U.S. Conference Board's index of leading economic indicators falls 0.8% in October (Reuters)
4) Loan Investors accuse Goldman Sachs of naked shorting (Bloomberg)
5) Federal Reserve blows out balance sheet again. Check the graph here.
6) Citigroup Weighs Its Options, Including Firm's Sale (WSJ) - (They forgot bankruptcy! - Ed)
7) Fed to Cut Rates to Zero on Deflation Risk, JPMorgan Predicts (Bloomberg)
8) Switzerland slashes interest rates a full percentage point to 1% - (telegraph.co.uk)
9) Alt-A Losses Outstripping Expectations, Moody's Says (housingwire.com)
10) JPMorgan May Fire 10% of Investment Bank Staff (Bloomberg)
11) GMAC Applies for Status as Bank, Begins Debt Swap (Bloomberg)
12) (Corporate) Bond Risk Soars to Record as Markets Return to 'Crisis Mode' (Bloomberg)
13) Buffett's Berkshire Falls Most in at Least 23 Years (Bloomberg)
14) American Express had highest monthly increase in credit card delinquencies on record in October (Bloomberg)
15) CMBS (Commercial Mortgage Backed Securities) Market Begins to Show Fissures (WSJ)
16) Junk Bond Yields Reach Record 20% as Economy Declines (Bloomberg)

One thing is for sure...the bad news never stops in a depression.

Today's first story is from John Kemp, a columnist over at Reuters. John says..."Quietly, without fanfare, the Federal Reserve has turned on the printing presses. The central bank is flooding the market with enough excess liquidity to re-float the banking system..." The article is entitled "Quantitative easing has begun" and the link is here.

About a week ago, I ran a story on a return to the gold standard as described by Larry Edelson. In the introduction to his latest column...which defends his previous column...Mr. Edelson had this to say..."Not surprisingly, my Money and Markets column last week about a new monetary system based on an upward revaluation of the price of gold set off quite a buzz all over the world." His latest is entitled "More On the New Monetary System..." and the link is here.

The ultimate result of shielding men from the effects of folly is to fill the world with fools. - Herbert Spencer, English Philosopher (1820-1903)

With the price of a lot of base metals, natural gas...and pretty soon, crude oil, if things keep up the way they are...well below their respective costs of production, it won't be long before we see even more massive supply destruction than we've already witnessed to date. Unless Paulson and Bernanke partially reverse engineer what Don Coxe, chief investment strategist for the Bank of Montreal, called "The Crime of the Century"...meaningful portions of the mining industry might be out of business by the summer of 2009.

All of us at Casey's Daily Resource Plus look forward to seeing you right here on Saturday morning.

Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.