From Ed Steer:

Gold did nothing in the Far East during yesterday's trading, but did develop a slightly positive bias as the London session advanced. The Comex open saw gold up about 1% immediately, only to have not-so-gentle hands hammer it (and any subsequent nascent rally) flat. The absolute bottom was during lunch hour in New York...and from there, a rally (short covering?) began. This lasted well after the Comex close...and into electronic trading on the Globex, before developing the usual turn to the right. Estimated volume yesterday was a very large 162,902 contracts, with a switch effect of 19,368 contracts. And...except for greater price volatility...you could be forgiven if you thought the silver chart could be exchanged with the gold chart...as they were almost mirror images of each other.

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On Wednesday, gold open interest fell another 4,461 contracts to 313,729...as the tech funds and small speculators continue to liquidate. There are almost no positions left to liquidate in silver, as it's pretty well cleaned out. Silver o.i. rose 299 contracts to 86,145.

Yesterday, both gold and silver touched their respective 50-day moving averages. It's important from a technical point of view, that the gold price hold here. But in order for the bullion banks (read JPMorgan) to cover the approximately 60,000 short contracts they still hold, they will need to break through the 50-day moving average with some authority to force the tech funds to liquidate their long positions. Ted and I were surprised that the Fed/JPM didn't press their advantage when they had it yesterday. The gold P&F chart below doesn't look that bullish, as it shows a 'triple bottom breakdown', with a down-side price target of $790.

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Lots of gold news today. I see in a story at mineweb.com that Gold Field Mineral Services (GFMS) reported that world gold production fell 88 tonnes in 2008...and "producer's total cash costs rose by 22% year-on-year to an average of $472/ounce." And in a Reuters story, also posted at mineweb.com, "South African gold ouput fell 8.7% in volume terms and total mineral production dropped 6.1% in November...compared to the same month in the previous year." Posted at Kitco was this piece from jckonline.com (India) headlined..."Gold Jewelery Fabrication Fell 11% in 2008"..."World jewelry fabrication fell by 11 percent (262 tons) in 2008, which took the total to its lowest level since 1989, according to a report released [by GFMS – Ed] Thursday. Record and volatile gold prices, combined with a deteriorating economic backdrop, were the key reasons behind the poor performance." [Doesn't GFMS or CPM Group ever do a positive story on gold...or silver? Just asking. – Ed] And lastly, the gold ETF, GLD, added another five tonnes yesterday...another new record at 795 tonnes. The SLV ETF currently sits at its record of 7,143 tonnes...and is still owed silver, according to Ted Butler.

In 'other news'...the big stories are Citigroup and Bank of America. Rumours of hundreds of billions in bailout money and weekend takeovers are swirling. JPMorgan's chart is looking pretty ugly as well...as well it should...with over $100 Trillion in derivatives on its books. The last of the biggest US financial institutions are starting to circle the drain. We're getting into "too big to bail" territory with these guys. From Bill Murphy over at lemetropolecafe.com yesterday..."Citigroup closed down 70 cents to $3.83. Bank of America lost $1.88 to $8.32. And in a stunner, JP Morgan reversed course late in the day to make a new low for this move down. It finished $1.57 lower to $24.34, after making a high of $27.01. UGLY!!!" [Yep...that's what it is. – Ed]

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Today's first story is from The Guardian in London. Banks are in trouble everywhere, and in Britain they are particularly bad. The headline reads "Fear grips banks as Barclays cuts 2,100 more jobs" and the link is here.

The second story is from the El Paso Times of all places. The headline reads "U.S. military report warns 'sudden collapse' of Mexico is possible"..."Mexico is one of two countries that "bear consideration for a rapid and sudden collapse," according to a report by the U.S. Joint Forces Command on worldwide security threats. In terms of worse-case scenarios for the Joint Force, and indeed the world, two large and important states bear consideration for a rapid and sudden collapse: Pakistan and Mexico." The link is here.

And lastly...in commentary posted today at mineweb.com, Lawrence Williams takes note of the increasing speculation about an upward revaluation of gold by central banks. Williams' commentary is headlined "Gold Revaluation -- Clutching at Golden Straws"...and you can find the story linked here.

It is historically true that no order of society ever perishes save by its own hand. - John Maynard Keynes

With the Dow dipping below 8,000, it's a safe bet that The President's Working Group was all over this market from that point on...as it was obvious that the Dow was heading south with a vengeance. Once again a crash was averted. Scary stuff to be sure...and almost as scary as this. Click here.

Have a great weekend and I'll see you on Saturday.

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