From Ed Steer:

The US$ had a huge gain yesterday...and gold got whacked for almost $30 between its high of $990 at 4:00 p.m. in Hong Kong trading yesterday afternoon...and eleven hours later at 3:00 p.m. at its low tick in electronic trading in New York. At three different times yesterday, gold had some help falling that much...the most obvious coming shortly after London closed for the day. I was surprised that the bullion banks didn't pull their bids on the Comex open...something they normally love to do after the set-up they gave themselves during London trading.

On Tuesday, the US$ had a huge fall. The low price of the day [around $970] was at 9:00 a.m. in London...and the high [$985] was at the London close...seven hours later. It was obvious that the price was capped in New York trading that day...or [as I said in my commentary then] gold would have easily blown through $1,000.

On Monday, the US$ was down as well...but the gold price was not allowed to reflect that. Here's the graph. Wednesday's trading is in green, Tuesday's trading is in red...and Monday trading in blue.

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After watching the price peak at 3:00 a.m. yesterday morning...followed by the action on the London open...I knew that the "boyz were back in town"...and that gold wasn't going north of $1,000 on this attempt.

Turning to silver...the damage there was even worse, as it had almost a dollar peeled off its price during the same time that gold 'lost' $30. Tuesday...when the dollar had its really bad hair day...silver was up 45 cents [low to high], but 'lost' more than double that on a move up in the dollar yesterday which was barely bigger than its fall on Tuesday. Once again, silver had a little help at the London close yesterday when it got pushed off the same cliff as gold.

Yesterday's deliberate tape-painting activity in both gold and silver resulted [if you're a technical trader] in what is called a key reversal to the down side. This is an ominous sign to a chartist. But considering the damage done to the prices of both gold and silver...I was happy that the HUI and XAU were only down what they were...and actually recovered off their lows of the day.

Changing the subject briefly, I want to take a quick look at the open interest changes for Tuesday's trading...which was the last up-day before the slaughter yesterday. Gold o.i. rose 2,463 contracts to 391,057 on light volume of 96,287 contracts. In silver, o.i. also rose another chunk...this time by 1,487 contracts to 104,986...on eye-popping volume of 47,060 contracts traded. That's the biggest number of contracts I've ever seen traded in silver. Tuesday's open interest numbers should be in tomorrow's Commitment of Traders...fingers crossed. Open interest numbers for yesterday's horrific down-side price action will be out around noon, New York time today. Ted and I are more than interested in what they are. If you want to see the numbers for yourself when they're updated, the link is here.

The Comex Delivery Report for Wednesday showed 438 gold contracts delivered...and two in silver. As you can tell, June is not a big delivery month for silver...but having said that, 366 contracts have already been delivered in June, and it's only the third day of the month. That ain't chopped liver...and there will undoubtedly be more before June is in the history books.

There were no changes in eagle production from the U.S. Mint. There were no changes at SLV either...but the GLD ETF reported a fall of 1.53 tonnes, which is hair under 50,000 ounces. Over at the Comex-approved silver warehouses, silver stocks rose a very smallish 62,637 ounces. The usual N.Y. gold commentator had this tidbit yesterday...."U.S.-centric technical gold watchers are now fairly concerned. Those who watch India will merely see this break as a gift to the Indians. When world gold was last at this level in February, floods of scrap were coming out of the East. Not now. In fact, the strength of the rupee will probably permit heavy Indian buying tomorrow [now today - Ed].

Below is the 3-year chart for the U.S. dollar. Carefully note that the dollar is hugely oversold...with the MACD line at a record low. A technical bounce would be entirely within reason...and without doubt, the precious metals will [be made to?] suffer as a result. Both gold and silver were both overbought...a condition which I'd mentioned a time or two in the last week. I've been warning you about this for some time, so what's happening right now should come as no surprise.

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The first story today is from The Guardian in London. It appears that Prime Minister Gordon Brown has a bit of a rebellion on his hands. A group of rebel MP backbenchers are attempting to solicit enough signatures [70] to mount a challenge to Brown's leadership. David Cameron told Brown at prime minister's question time that his "ability to command the cabinet has simply disappeared". He said the prime minister was "in denial" about the scale of the crisis facing him. The headline reads "Rebel Labour MPs seek signatures for 'Gordon must go' letter". I thank Craig McCarty for the story...and the link is here.

In a Bloomberg piece yesterday, I see that Bill Gross is "advising holders of U.S. dollars to diversify before central banks and sovereign wealth funds ultimately do the same amid concern about surging deficits." Gross says that [Little Timmy] Geithner's "plan to bring the budget back into balance won’t be successful". [It's nice to see that Mr. Gross has a keen grasp of the obvious. - Ed] The headline reads "Gross Says Diversify From Dollar as Deficits Surge"...and the link is here.

And lastly is this piece from the indiatimes.com. In it, Jim Rogers doesn't mince words...or suffer fools gladly. The headline says it all..."Fund Mangers can become farmers: Jim Rogers". I once again thank Craig McCarty for digging up this story. The link is here.

Everything government touches turns to crap. - Ringo Starr

With the Commitment of Traders already showing "Red Alert" in both gold and silver...and with both metals overbought...and the U.S.$ in the toilet...I could see it coming. Could we go to new highs from here? Sure...but past history says that if we do, it won't last long. Could the U.S. bullion banks get overrun? Sure...but it doesn't look like it at this juncture...unless someone with very deep pockets shows up real soon. How bad could it get on the down-side, you ask? Well...gold's 50-day moving average is at $915.40...and silver's is at $13.43. You don't want to know where the 200-day moving averages are. Today's activity will be interesting...and should tell us a lot.

See you on Friday.

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