From Ed Steer:

Gold had tacked on about $8 by late Thursday afternoon in Hong Kong...which was shortly after the Thursday morning open in London. But four hours later [8:00 a.m. in New York], even this gain was gone. But from that point, however, both gold and silver began spirited rallies. These rallies lasted throughout the entire Comex floor session, but both traded sideways after that...which they're still doing eight hours after the Globex close in New York. Here's the current Kitco silver chart. The red line shows yesterday's trading. You can see that all of the gains were during Comex hours in New York. The gold chart is similar.

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Both metals gained back large chunks of what they lost on Wednesday. So did the XAU and HUI. Gold was up 1.85% in New York trading yesterday. Silver was up 3.72%...and platinum and palladium continue their winning ways...up 4.53% and 4.98% respectively. It would be nice to see gold and silver tack on some of the daily gains that these other two precious metals have been enjoying lately. Of course, the fact that neither platinum or palladium have JPMorgan et al sitting on the price by way of huge concentrated Comex short position, may explain why they're doing so well.

I mentioned yesterday that both Ted and I were looking forward to seeing Wednesday's open interest numbers when they became available on Thursday. We both thought that there would have been some decent tech fund long liquidation and bullion bank short covering after the big hits that gold and silver received. We were wrong. Open interest in gold was up a fairly large 4,866 contracts to 395,923. Volume was pretty decent at 135,432 contracts. Silver's huge drop in price [almost a dollar between its Wednesday's high and low] showed an increase in open interest as well...up 1,187 contracts to 106,173. Volume was another big number...44,965 contracts.

Ted's comment to me was that he didn't know what to make of it, although he did point out that even though the price declines in both metals were pretty big, no major moving average was violated to the downside...and that may explain why there was no liquidation. As far as I'm concerned, there's only one way that prices can drop on a rise in open interest...and that is if someone is putting on a huge short position. Of course, the secrets behind Wednesday's open interest numbers will not be available until the June 12th COT...next Friday...not today. When the boyz are making a move in the markets, they don't like people finding out what they're doing until long after the fact.

The Comex Delivery Report yesterday showed that only 104 gold contracts...along with two silver contracts...were delivered yesterday. There are still about 3,450 gold contracts [subject to change at any moment] still to be delivered in June. Over at the U.S. Mint they have increased one ounce gold eagle production another 12,500...to 15,500 for the month of June so far. In silver eagles, another 40,000 have been minted, bringing June's total up to 377,000. And at the Comex-approved warehouses, a fairly large 1,003,931 ounces of silver were taken out of inventory.

Talking about silver, here's the current chart of the silver ETF...SLV. You will note that we are in record-high territory as far as physical silver allegedly held for investors. The gold graph looks similar. I thank Gene Arensburg for providing the chart.

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The first story I have this morning is from the Pacific Business News [Honolulu]. The headline reads..."California will run out of cash in 14 days". "The state wallet is empty. The bank closed. Credit has dried up. California's day of reckoning is here," Governor Arnold Schwarzenegger told lawmakers in a special Tuesday morning address at the Capitol. I thank Craig McCarty for the story...and the link is here.

Here's a Bloomberg story of some interest. I see that JPMorgan has also gone into the oil storage business...probably using taxpayer-provided TARP money. The headline reads "JPMorgan Hires Supertanker for Storage, Brokers Say". I guess they have the inside scoop that oil is going much higher later this year. I wonder if that's one of the reasons why the gold price is strong as well. The link is here.

My last item is courtesy of the King Report. In a story by Ambrose Evans-Pritchard from The Telegraph in London comes this must read piece entitled "Latvian debt crisis shakes Eastern Europe". "Latvia has become the first EU country to face a sovereign debt crisis after failing to sell a single bill at a treasury auction worth US$100 million." In the grand scheme of things, Latvia is not a particularly large country, "but it has vast repercussion for the region," said Bartosz Pawlowski of BNP Paribas. As I said before, this is a must read article, and the link is here.

Upon further review, April Factory Orders were revised lower, to -1.9% from -0.9%. Oops! Ben [Bernanke] better spread more fertilizer because his 'green shoots' are wilting. - Bill King, the King Report, 04 June 2009

I note, as I put the finishing touches on this rant, that the London gold market is now open...and neither gold nor silver has done much since the Comex close yesterday. Maybe we'll see more action as the London day progresses...but we may have to wait until the Comex opens [where 95% of all gold and silver trading occurs anyway] before we see more fireworks...either up or down.

I must admit that after Wednesday's hammering...Thursday's big up-day was a bit of surprise. When the bullion banks are ready to do the dirty, Wednesday's action is typical, with the slaughter continuing for the next week or so. It still might. The usual N.Y. gold commentator was saying that physical demand in India, the Far East, Japan and the Middle East has been virtually non-existent for all of 2009. It's obvious that other factors are at play at the moment...as they should be.

I'll be reporting from the Cambridge House Resource Conference in Vancouver tomorrow and Tuesday...and I'll see you then. All of us at Casey's Daily Resource Plus hope you have a great weekend.

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