From Ed Steer:

Gold didn't do a lot yesterday. The early morning Far East 'top' (such as it was) occurred at the Sydney close, and then it got sold off a little over $10...with the 'bottom' (such as it was) coming at the London a.m. fix for a change...and the N.Y. 'top' (such as it was) occurring at the London p.m. fix. It was another typical day, but with very subdued price action. This is not entirely surprising since the boyz put the jack boots to it at the Comex open on Monday.

Silver followed a similar path, except the bottom for silver was at 8:30 a.m...shortly after the Comex opened in New York. From there, silver tacked on about twenty cents. Once again, it was a typical day in the life of silver (and gold) after it had been hammered like it was the day before.

Volume yesterday was only 96,816...less than two thirds of the volume on Monday.

On Monday's crucifixion, gold open interest dropped a whopping 15,318 contracts to 318,348. This would indicate that the tech funds and the non-reportables were forced to sell their long positions into the price vacuum created by the bullion banks yesterday...and at an excellent profit to the bullion banks, I might add. The bullion bank(s) covered their short positions. Despite the thumping that silver took at the same time, it's o.i. only dropped 127 contracts. That could be deceptive, as the bullion banks could have gone long instead of covering their shorts. Hopefully we'll find out what happened in Friday's COT.

The usual New York commentator had the following... “The European Central Bank consolidated financial statement reported an €22Mm (1.1 tonne) reduction in ‘gold and gold receivables’ said to reflect ‘the sale of gold by one Eurosystem central bank.’ As usual recently, this is far below the 9.6 tonne level notionally required to meet the average WAG2 sale level (last week's total was 0.95 tonnes).”

There has been heavy volume in the SLV ETF during the last couple of days. In a conversation with Ted Butler yesterday, he feels that based on this activity, the fund is now owed somewhere between 3-5 million ounces. If that's the case, it will be of interest to see how long it takes to show up...or at least the bookkeeping entry that says it's there.

I see that the Q1/09 U.S. budget deficit soared to $485.2 billion. Annualized, that's getting within a rounding error of $2 TRILLION!!! But according to last night's King Report..."As we keep noting, the ‘real’ deficit is already in excess of $1.5 trillion, as represented by the year over year change in ‘Gross Treasury Public Debt’." But who's counting anymore. By comparison, the budget deficit for all of fiscal year 2008 was $455 billion. In 2007, it was $161 billion.

In a story in The Telegraph in London yesterday, was this headline..."S&P threatens to strip Spain of top AAA rating"..."as the country's budget deficit explodes, offering the clearest warning to date that even wealthy states are running out of room to borrow. ‘The economy is less resilient than any other AAA state. It is more dependent on real estate and tourism, and there is very high corporate debt. Household debt is close to levels in Britain and the US,’ said an S&P analyst.” In a marketwatch.com story filed out of San Francisco the headline read..."Citigroup to unveil major reorganization plan". [This is just a cute way of saying that it's cutting itself up and selling itself for scrap at fire-sale prices. – Ed] In a story at iol.co.za out of South Africa comes this story regarding Zimbabwe..."Zim bank unveils new note"..."Zimbabwe's central bank is releasing a new Z$50-billion note - enough to buy three newspapers in the nation's hyper-inflated economy. The new note is worth $1,25 at Monday's black market exchange rate. Two weeks ago Z$50-billion was worth $3,30. The Reserve Bank of Zimbabwe unveiled the new Z$20-billion and Z$50-billion notes in an advertisement in Monday's Herald newspaper." Reuters (Washington)..."News channel Fox Business Network sued the U.S. Federal Reserve on Monday, saying that the government has failed to release details on financial companies receiving federal funds. Fox said it made an initial request on November 10th last year under the Freedom of Information Act."

Mercifully, I only have two stories today...both of them 'must reads'. I touched on the first story briefly in the previous paragraph, but the whole article must be read to appreciate how quickly the world (not just Spain) is falling apart. I think it's safe to say that the world is imploding at the fastest rate on record...and the world we know is vanishing before our eyes. The story is from The Telegraph in London, and was written by Ambrose Evans-Pritchard. The article is entitled "S&P threatens to strip Spain of top AAA rating"...and the link is here.

The second story confirms the first one. It, too, is from the same London paper and the same author. This one's entitled "Shipping rates hit zero as trade sinks"...and the link is here.

I was expecting another big down-day in the precious metals yesterday...and it didn't happen. I'm not disappointed. Are the Fed and JPMorgan through? Who the hell knows. They still have about 65,000 shorts to take profits on...and drive the price down doing so. Will they? Don't know. Can they? Yep, anytime they wish...unless world events overwhelm them. We'll just have to wait and see.

Have a good day, and I'll see you here on Thursday morning.

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