From Ed Steer:

Both gold and silver rose in Sunday evening trading on the Globex [counterparty...Western Pacific Ocean]. The peak prices in Far East trading occurred around lunchtime in Hong Kong. From there, both metals drifted slightly lower...and remained there all through European trading until the Comex open in New York...then away they both went.

Gold managed a $10 rally before some not-for-profit seller showed up at 9:15 a.m. Eastern time. Once the London p.m. gold fix was in, gold rallied again...making it a hair above $900 for a few seconds...before some other [probably the same] not-for-profit seller showed up. From there it got sold off into the close.

Silver's 8:00 a.m. rally on the Comex was like a moon shot...and heaven only knows how high the price would have gone [certainly north of $13] if the same not-for-profit seller hadn't showed up at exactly the same 9:15 a.m. time. Silver got sold off a hair going into the London p.m. gold fix...rallied again, and made a high of $12.90 before being sold off a bit into the close.

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Trading volume in both metals on Monday was extremely light...vapours mostly. All the gains [and the 9:15 and N.Y. lunch time price cappings] were done on a few hundred contracts in silver and a few thousand in gold. It's always encouraging to see decent price gains on a low volume day. The HUI didn't finish on its high of course, but we'll take the gains regardless.

Open interest for Thursday's trading was a bit of a surprise. Gold o.i. fell 1,026 contracts to 333,481. That's on top of the 10,422 contract drop on Wednesday. And silver fell a fairly significant 1,063 contracts on Thursday...to 91,548. That's also on top of the 490 contract decline on Wednesday. Thursday's o.i. declines...like the declines on Wednesday...were counter to those two days' respective price action....so I consider it to be data deliberately held back so that it wouldn't be reported in Friday's COT report. The cut-off for Friday's report was at the close of business last Tuesday...and this Friday's cut-off is at the end of trading today.

As it stands, the Commitment of Traders report was very positive anyway...but would have been even more so if the withheld data had been reported in a timely manner. In silver, the Commercial traders [all bullion banks] decreased their net short position by a substantial 3,522 contracts. This was at the expense of the tech funds in the Non-Commercial category and the small traders in the Nonreportable category. They decreased their net long positions by 2,946 and 576 contracts respectively. If one were to include the 1,553 contracts deliberately not reported, the COT for silver is now back to readings that existed when silver was under $9 in November of last year...except now the price is back to almost $13 this time. As of last Tuesday...the cut-off for Good Friday's COT...the bullion banks were net short 147.8 million ounces of silver...and less than that now. The full-colour graph of the silver COT is linked here.

In gold, things are not quite as rosy...but they have improved considerably in this latest COT report. In the Commercial category, the bullion banks have decreased their net short position by a huge 28,703 contracts. This was, of course, at the financial expense of the tech funds in the Non-Commercial category and the small traders in the Nonreportable category. They reduced their long positions by 27,047 contracts and 1,656 contracts respectively. As of last Tuesday, the bullion banks had a net short position in gold of 15.3 million ounces. Even if you include the entire two days’ worth of data that weren't reported in a timely manner [another 11,448 contracts], the downward-revised net short position would only decrease by 1.1 million ounces to 14.2 million ounces [1 contract=100 oz. x 11,448 contracts]. At the bottom, back in early November [the Nov. 11th COT to be precise], the bullion banks were net short about 6.9 million ounces. That number is 7.3 million ounces [73,500 Comex contracts] below where we sit now. The full-colour COT gold graph is linked here.

That's why I [and Ted Butler] say that there is such a dichotomy between silver and gold. Silver is pretty much cleaned out and is the closest to the bottom of the barrel it's been in a very long time [years...not just since last November]. This is hugely bullish. But as I've been saying for weeks...if JPMorgan and HSBC USA put their minds to it, gold could still get creamed pretty good...taking silver with it. When the bullion banks [the Commercials] were sitting at that net short position of 6.9 million ounces...gold was sub-$700. BUT can they do it? Will they do it? Nobody knows...except JPMorgan and HSBC.

As the usual N.Y. commentator said "...further liquidation is clearly possible. This is the opinion of John Reade of UBS, rather surprisingly publishing from London on Easter Monday. Noting a 3.32 million ounce fall in the CFTC spec long to Tuesday, April 7th...[2.1 million liquidated longs, 1.08 million ounces new shorts] and a further 1.1 million ounces of open interest cuts since then, he nevertheless is cautious, based on chart considerations." [It's hard to believe that John Reade and I would agree on anything...but there it is! - Ed] The N.Y. commentator chimes in with his own opinion..."I seriously doubt this. The premium news from the various last-resort buyer markets in the East has--admittedly [only] in the last few days--been too positive. But, although gold was for once fairly steady into the close, gold shares were dispiritingly soft: the HUI closed up 2.36% and the XAU up 1.6%, but both were weakening ominously at the end."

I just can't believe that they can do it either...at least not those kind of lows. However, the 200-day moving average in gold is still sitting unbroken to the downside. As I said last week, and Ted Butler agrees, JPMorgan and HSBC could have taken out that moving average with ease at that time...but they pulled their punches. Why they chose to do so is a big question mark. But despite this 'doom and gloom' commentary, we could get a big move to the upside in both metals if the bullion banks decide to let the price run for a while. But, if we do get a big hit to the downside, there will be no doubt as to who is doing it...and why they're doing it. So...we wait and see how this plays out. Here's the 1-year gold chart so you can see what I'm talking about.

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Also released on Friday was the CFTC's Bank Participation report for April...for positions held [in gold and silver] at the end of trading on Tuesday, April 7, 2009...the same day as the last Commitment of Traders report. Because of that, we can compare these two reports against each other. Here are the highlights...or lowlights...depending on your point of view...

Two U.S. banks are short 28,492 Comex silver contracts. They hold zero long positions. These 28,492 contracts held short represent 30.6% of the entire Comex open interest, or about 45% of the entire Comex silver market. To cut to the chase, two U.S. bullion banks are short about 45% of the entire Comex silver market. The U.S. banks are JPMorgan and HSBC USA. Non-U.S. banks [15 in all] are long 9,341 Comex contracts and short 2,285 Comex contracts...for a net long position of 7,056 Comex contracts.

In gold, three U.S. banks are short 105,854 Comex contracts and long 1,206 Comex contracts, for a net short position of 104,648 Comex contracts. This means that three U.S. bullion banks are short 10.5 million ounces of gold on the Comex. As I said in a previous paragraph, the Commercial [bullion banks] net short position in last Tuesday's COT was 15.3 million ounces. This means that three U.S. banks [JPMorgan and HSBC and one other in a very minor way] hold two thirds of that entire net short position. Non-U.S. banks [21 in all] hold 44,894 Comex long positions and 32,849 Comex short positions...for a net long position of 12,045 contracts.

In a nutshell, U.S. banks [primarily JPMorgan and HSBC] are short four silver Comex contracts for every Comex silver long held by a foreign bank...and in gold, U.S. banks are short about nine Comex contracts for every Comex long held by foreign banks.

Armed with this data, how difficult is it to figure out who controls gold and silver prices?

The CFTC produces this report, and even with the data contained in it, they still won't admit that there's anything illegal going on. The concentration of these short positions proves manipulation. Here's the URL to the April Bank Participation report. It shows 'bank participation' for all commodities and it’s really easy to follow. Silver and gold are about two thirds of the way down the page. The link is here.

In other news, there were no Comex deliveries on Monday in either gold or silver. We are well along in the April delivery month for gold...and as of the close of business on the Comex on Thursday, there were still 2,282 contracts to be delivered. At the Comex-approved precious metals warehouse, silver inventories declined another 411,222 ounces on Monday. The U.S. Mint updated its gold and silver eagle production yesterday as well. One-ounce gold eagle mintings rose another 36,500 to 68,500 for the month. In silver eagles, another 533,000 were minted, bringing April's total up to 1,210,500. There were no changes in either GLD or SLV.

I heard rumours about 'green shoots' sprouting and the beginning of signs of a turnaround in the economy over the weekend. I beg to differ. Here's a leading indicator that you can't fool...and so far it isn't fooled. It's the Baltic Dry Index. It's little bear market rally is officially over...and it's currently sitting at 1,478. When this Index begins to show permanent signs of life...then we'll talk about a recovery.

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Two stories and one video today. The first story was posted at finance.yahoo.com. The headline says it all..."Michigan Facing 'Economic Katrina' If GM Files for Bankruptcy, Rep. McCotter Says". It's a quick read...and I thank Craig McCarty for sending it along. The link is here.

In a story I dug up over at Bloomberg yesterday, is this headline " 'Lehman Shock' Fuels New Wave of Homeless in Osaka". With the massive production slowdown in Japan over the last six months, it won't be long before the Japanese begin to develop even more serious social problems. No wonder everyone is betting that they will devalue the yen. The link is here.

And lastly is this terrific PBS interview by Bill Moyers with whistleblower William Black who discusses the systemic fraud on Wall Street and in Washington, D.C. The losses in IndyMac alone equal to the total losses of the late 1980s' S&L crisis. I never thought I would hear anything like this on any media outlet in the U.S.A...even PBS! It was shocking! I again thank Craig McCarty for the story. The half-hour program is a 'must watch' and the link is here.

Myron Scholes, the Nobel prize winning co-creator of the eponymous Black-Scholes-Merton option pricing model, observed that the derivative markets have stopped functioning and are creating problems in resolving the global financial crisis. Scholes was quoted as saying that: “[The] solution is really to blow up or burn the OTC market, the CDSs and swaps and structured products, and … start over…” ISDA, the beleaguered derivatives industry group, predictably countered limply that: “…the notion that you would, as he said, blow up, the business in that way is just misguided.” - Bloomberg...March 6, 2009

So, what's in store for this week? How long will the Dow rally last in the face of overwhelming bad news? The same could be said for the U.S. dollar. As for gold...JPM and HSBC are still short a whole pile of it. Silver is pretty much ready to blast off...but what happens to gold will be the key...and to tell you the truth...I haven't the foggiest idea which way the PM market is going to go. However, yesterday's price capping action in both metals did nothing to warm the cockles of my heart. All we can do is wait it out.

See you on Wednesday.

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