From Ed Steer:

Friday morning trading in gold in the Far East started like every day over there lately...heading lower. Of course all this ended abruptly at 3:00 a.m. New York time...and about half an hour before the London open. But shortly after London opened, someone put up the sign that said 'that's it for the day'...and except for a $4 rise over the next 14 hours of trading...it was. Silver was similar.

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However, I guess we should be thankful for small mercies...at least the 'key reversal to the upside' I spoke of yesterday managed to bear fruit. But despite gold's gain of about $28 on the week, the shares actually finished down about one percent. Maybe next week will be better...although the RSIs for both metals are quickly approaching what some people might consider as being overbought.

Below is the P&F graph for gold. It's a wonderful sight to behold. The 'Bullish Price Objective' shows $1,060. As the graph indicates, there will be some 'resistance' at $935 and $985 (technical...or otherwise). One thing is for sure...it won't be a straight line getting there...but it looks very positive. But on a more sombre note...along with the suspicious gold/silver price action...I was not impressed with the action of the precious metals shares yesterday, either.

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As you are aware, Thursday was a big day for gold, and I was braced for some incredible open interest numbers when they came out on Friday morning. Well, incredible they were, but not what I was expecting. Gold open interest rose...but only 2,292 contracts to 348,096. That's not a lot. Silver o.i. was up 1,070 contracts to 90,955...which isn't a lot either. With month end, switching and first day notice all in play, I'm not going to attempt to read anything into these numbers until the Commitment of Traders comes out next Friday (February 6th).

Talking about the COT, the latest numbers came out yesterday and were in line with expectations. There certainly was deterioration in both gold and silver. In silver, the bullion banks in the Commercial category went net short another 3,265 contracts. The traders in the other two categories were (naturally) the ones going long. In gold, the pattern was similar, the bullion banks took the short side of the trade to the tune of 19,445 contracts net. The tech funds in the Non-Commercial category and the small traders in the Non-reportable category were (again, not surprisingly) all net long. Only the bullion banks are prepared to take on a gold short position at these prices...and let me remind you one more time that four of them, the '4 or less' traders in the Commercial category, are short two-thirds of the entire Comex gold and silver market...the ENTIRE market...not just their own categories. Yet the CFTC won't say a thing...even though their own COT report shows it for all to see...including us! And according to the latest report (Q3/08) from the Office of The Comptroller of the Currency (OCC), the three American banks with the largest precious metals derivatives positions are...in order of size; Citigroup, HSBC USA...and by far the biggest...JPMorgan. Between the three of them, they hold 97% of all precious metal derivatives of the 400 U.S. banks listed. I would bet some serious coin that three of the '4 or less' traders in the Commercial category of the Commitment of Traders are these crooks. Any questions???

In gold news, I see in a Reuters story posted at kitco.com that "Russian 2008 gold output was up 13.3% to 184.49 tonnes from 162.84 tonnes in 2007...Output achieved by refining gold from scrap rose by 22.9% to 8.14 tonnes from 5.87 tonnes. Production of gold as a by-product of other metals rose 2.8% to 12.46 tonnes from 12.12 tonnes." There were no changes to either precious metal ETF on Friday...GLD or SLV. In a conversation with Ted Butler, he feels (based on volume over the last five trading days) that the GLD is owed about a million ounces...and the SLV between 15-20 million ounces. The gold should be reasonably easy to come across in good delivery form, but Ted and I both felt that it would be a while before all that silver showed up. They are probably waiting in line at the smelters just like the Central Fund of Canada is doing with their latest offering. It will be of interest to see how long it takes the SLV to get it...or at least report that they have it. Whether they have it or not is a different story. In case you haven't figured it out, I have my deepest, darkest suspicions about these two ETFs. Not withstanding their individual prospectus...JPMorgan (The Federal Reserve's bank) is the custodian of the SLV...has the biggest derivatives position in precious metals (and I doubt they're net long this market either, baby!)...and the biggest silver short position on the Comex. Ted Butler has been screaming at the Comex about manipulation and concentration in the silver (and gold) market for twenty years...and they won't lift a finger to admit what is obvious in their own reports. Now....please ask me again why I am suspicious of the SLV.

In other news, I noted in a Bloomberg story that "the S&P was down 8.2% in January...adding to last year's 38% plunge." Washington (Reuters) "U.S. 4th Quarter GDP down 3.8%, biggest drop since '82"

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Today's first story is posted from Davos, Switzerland. It's from The Telegraph in London and is written by Ambrose Evans-Pritchard. It's a couple of days old, but still very much worth reading. The headline reads "US-China currency war eclipses Davos, and threatens world"...and the link is here.

The second story is also centered around the Far East. It's from the economist.com and goes into some detail as to the troubles that this area of the world is facing now that the world's economies have gone bust. The essay is entitled "Troubled Tigers: Asia needs a new engine of growth" and the link is here.

And lastly comes this rather alarming headline..."California pension funds close to bankruptcy". That may be a stretch...but there's no question that California's two largest pension funds have taken some major losses. I would think that most pension funds are now (or soon will be) in the position that California's public servants’ pension funds now find themselves in. It is not happy reading...and the link is here.

It would be absurd to think that Bernanke would be able to nail a 1 to 2 percent Goldilocks inflation rate coming out of this. What you have is competitive devaluation of all currencies around the world. Precious metals are the only hedge in this kind of environment. The trend of gold over the next five years is a straight line toward $1,700. - John Brynjolfsson, Chief Investment Officer, Armored Wolf LLC, Alis Viejo, California...Bloomberg, January 29, 2009

Today's 'blast from the past' is a little unique. There's actually two videos...and it takes both to tell an incredible story of how the Internet turned an unknown talent (at least in America) on the other side of the world, into the lead singer of one of the most well-know rock groups of all time. The man's name is Arnel Pineda...and the group is Journey. The 'rags to riches' video is linked here...and the music video is linked here. Turn up your speakers and enjoy this heart-warming and uplifting story...and the 'new' voice he brought to Journey. I thank Dave Delve for sending this to me.

So...another week come and gone. As I said before...gold was up about $28 for the week and the HUI was down a percent and change over the same period. How's that for progress? But hey...this journey is just getting underway. The world's economic, financial and monetary realignments are in their infancy. US$ debasement is just around the corner...and somewhere in the future may come hyperinflation. Buy gold bullion...buy silver bullion...and take delivery!

See you on Tuesday.

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