From Ed Steer:

Gold didn't do a lot in Far East trading on Tuesday. The low of the day occurred at the open in London...and for the next two hours, gold put on a spirited rally [$10+] that ended with the price going vertical about half an hour before the Comex open. However, as is always the case at moments like these, the usual not-for-profit sellers showed up and did their dirty until it was time for them to go for lunch at 12:00 noon in New York. Once 'da boyz' were at lunch, gold made a $7 run higher, which ended the second that floor trading was over on the Comex...and electronic trading began. And by the time that gold trading was over for the day...most of that gain had been made to disappear...and gold finished down about a dollar from Monday's close.

click to enlarge

Silver's path was almost identical to gold's...but wasn't anywhere near as volatile price-wise. The only big difference in the price action of both metals was that while gold's low of the day was at the London open...silver's low was at the end of trading in New York at 5:15 Eastern Daylight Time. And never forget for a second that silver is the center of the universe for the bullion banks. Gold is pretty easy to get...but there is no silver [in size] to found anywhere. As they have done in the past...and will probably do again in this selloff...they will use the gold price to beat the living snot out of the silver price. At least that's their usual modus operandi these days.

I've been carefully noting gold's reaction to movements in the dollar...or is it movements in the dollar reacting to the gold price? In the two days trading that we've had this week, I've been struck by the fact that when the gold price gets hit hard [Monday about 1:40 a.m. Eastern time...and 7:40 a.m. Eastern time on Tuesday...almost 18 hours apart to the minute], the US$ stages big rallies at precisely the same instant...with no lead or lag times. One does not follow the other...there is no cause and effect...no action/reaction sequence. Both occur simultaneously. This is not possible under any free-market conditions that I can think of. Here is Tuesday's US$ graph. Kindly compare the time of gold's vertical price spike on the Kitco chart above, to the beginning of the dollar rally on the ino.com US$ chart below. They are one and the same. The identical condition occurred on Monday morning at 1:40 a.m. Eastern when gold got creamed in Hong Kong trading. I don't have the US dollar graph for that, but you can see where gold got slammed on the above chart as well. From now on you can keep an eye out for this phenomenon yourself.

click to enlarge

Well, Monday's open interest numbers finally showed some improvement...but both Ted and I were still underwhelmed. Gold o.i. only fell 6,670 contracts to 374,617...with volume of 87,864 contracts. In silver, o.i. only fell 402 contracts to 100,995...on volume of 22,485 contracts. Remember what I said yesterday about the bullion banks taking their time about this liquidation process? Well, molasses in January it is. I'd much prefer 'death by one single thrust'...then this 'death by a thousand cuts' that we're getting.

The Comex Delivery Report yesterday showed that only 15 gold contracts were delivered along with 404 contracts in silver. It didn't take long for most of the deliveries to get done in July. There's only about 25 left in gold...and about 700 in silver...plus whatever new orders for delivery show up during the rest of the month. It's surprising how quickly the screams of an imminent Comex delivery default have died away. There were no changes in either GLD or SLV yesterday. But last week over in Switzerland at the Zürcher Kantonalbank, their gold ETF added another 59,929 ounces...and their silver ETF was up another 570,588 ounces. Their total holdings stand at 4.8 million ounces of gold and a substantial 49.4 million ounces of silver...plus they have platinum and palladium ETFs as well. I thank Carl Loeb [as usual] for these numbers. The U.S. Mint updated their production for the second day running. They didn't add any one ounce gold eagles yesterday, but they did add a substantial 175,000 silver eagles...bringing silver eagle production for July up to 450,000. Over at the Comex-approved precious metals warehouses, another 1,199,471 ounces of silver were withdrawn.

The usual N.Y. gold commentator reported that Dennis Gartman had the following to say yesterday..."The seller, whoever it is or has been, between $970-$1,000 has succeeded rather clearly in turning gold back in recent weeks, and we note that this is the third time in a year that [this] seller has succeeded in thwarting the gold bulls...with the trend line that can be extended on the daily charts back to the lows made in October of last year at $680, and which extends on through the lows in the early spring of this year at $860, a break through $915 would be devastating. We've no position in gold at the moment, nor would we wish to have one...but if we did, it would be as a seller."

I have three stories and a video today. The first story comes from Bloomberg where the headline reads "Oil, Gas Market Speculation May Face Restrictions". The words silver and gold are never mentioned, but Ted Butler feels that these two metals [especially silver] will be front and center in whatever decision is made. Butler feels that 99% of all the complaints that the CFTC has ever received from the public have to do with the silver and gold market...and the boys at the CFTC and the SEC want to get this monkey off their collective backs without making themselves look incompetent, asleep at the switch...or permanent residents at the Crowbar Hilton, like Bernie Madoff has just become. The link is here.

Speaking of silver analyst Ted Butler, here's his latest commentary which is definitely worth reading. It's entitled "This May Be The Last Time". We all hope that it is...and the link is here.

In a story out of The Times in London comes this headline..."Joe Biden speech sparks fierce response from Ayatollah Ali Khamenei" It appears the American Vice-President said that "the U.S. would not stop Israel from bombing Iran's nuclear plants." How to win friends and influence people! The link is here.

And lastly, here's a little mirth and merriment regarding the sub-prime housing bubble and its effect on different people. The video clip is entitled "Real Estate Downfall". I thank Kevin Cassidy for sending it along and the link is here.

The issue is always the same: the government or the market. There is no third solution. - Ludwig von Mises

As I put this to bed in the wee hours of Wednesday morning, I note that the 'usual suspects' showed up to hammer the gold price at the usual time...in the Sydney/London gap when only the thinly-traded Hong Kong market is open. It's obvious that the attempt ran into some serious buying almost immediately. Then gold got hit again on the London open. It could be another wild and wooly day in the gold and silver pits in New York today.

I hope your day goes well...and I'll see you here on Thursday.

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