From Ed Steer:

Moments before I filed my Friday report, I noted that both gold and silver were under considerable selling pressure in London, and I thought that it might be an interesting day on the Comex when it opened later in the morning. It wasn't. Even the dollar rally ran out of gas.

From its high at the Sydney close, to the Comex open about eight hours later, gold lost about seven bucks and change. Once the Comex opened, a smallish rally began that lasted right through Comex trading. From there, it flat-lined in electronic trading until the close at 5:15 p.m.

Silver followed a more tortuous route. As silver analyst Ted Butler has pointed out to me and everyone else on several occasions...silver is at the center of the precious metals universe for the bullion banks. As I mentioned in my closing comments yesterday morning, the price got hit shortly after the London open, and didn't see rock bottom until about 11:40 a.m. in Comex trading in New York. Like gold, silver recovered quite a bit of its losses by the close...but the damage had been done. With the new low [for this move] set in mid-morning trading, quite a few more longs threw in the towel and sold their positions...with the 'da boyz' standing there and covering their shorts. This is S.O.P. for the bullion banks.

The open interest changes for Thursday finally showed some real improvement...but fell well short of what either Ted or I expected. Gold o.i. fell 7,134 contracts to 366,909...on big volume of 114,238 contracts. In silver, o.i. fell 2,082 contracts to 98,809...on 21,561 contracts traded. Hopefully there will be further improvement when Friday's numbers are reported on Monday.

Of course the latest Commitment of Traders report [for positions held as of the close of trading on Tuesday, July 7th] was published yesterday. In silver, the bullion banks decreased their net short position by 3,052 contracts...which is a hair over 15 million ounces. But the entire Commercial net short position shows that the bullion banks are still short an eye-watering 37,432 contracts...187.1 million ounces of silver. But this situation has certainly improved greatly in the three days since the Tuesday cut-off. The full-colour long-term COT graph is linked here.

In gold, the bullion banks decreased their net short positions by 6,511 contracts...not a lot. As I've mentioned before, it's the gold short position that concerns me, because it has been declining at glacial speed since the top in the gold price during the first week of June. As of this COT, the bullion banks are still net short 191,307 contracts...19.1 million ounces. This number has also improved since the Tuesday cut-off. The full-colour long-term COT gold graph is linked here. This particular chart takes a while to load.

Another report that I'd been eagerly waiting for was the Bank Participation Report. It, too, came out yesterday...the same as the COT report...for positions held at the end of trading on Tuesday, July 7th. So we can compare apples to apples for this one week. This report shows, in grade 4 arithmetic, the huge short positions in silver and gold held by two or three U.S. bullion banks.

In silver, two U.S. bullion banks hold 32,407 Comex short contracts and 527 long contracts, for a net short position of 31,880 Comex silver contracts. Those 31,880 Comex silver short contracts represents 31.8% of the entire Comex open interest in silver!!! This number would be at least 50% higher if all the spread trades were taken out of the COT to give you a 'net net' position. Four paragraphs ago, where I discussed the net short position in silver from the COT report, I said that the "net short position in silver was 37,432 contracts. Two U.S. bullion banks are short 85.1% of that entire net short position. The banks are JPMorgan and probably HSBC USA.

Those are the two U.S. bullion banks. What are the rest of the world's banks up to in silver in this report? Well, there are 12 other banks in the world that have positions on the Comex. As of Tuesday, they held 7,979 Comex long positions and 1,210 short positions between all twelve of them. These non-U.S. banks are net long the silver market by 6,769 Comex contracts...that's barely 500 contracts each.

Now let's turn to gold. The Bank Participation Report shows that three U.S. bullion banks hold 116,895 short contracts on the Comex...but they only hold 528 long contracts. That leaves these three banks with a net short position of 116,367 contracts...which represents [as of Tuesday] 31.2% of the entire Comex open interest!!! The COT report I mentioned earlier shows that the net short position in gold was 19.1 million ounces. Since 116,367 contracts represents 11.6 million ounces of gold, straight division shows that three U.S. bullion banks hold 60.7% of gold's net short position on the Comex. The U.S. banks involved are JPMorgan, HSBC and maybe Citi a bit.

As for the non-U.S. banks, there are 22 of them that have positions on the Comex. Between them...and as of Tuesday...they held 25,425 Comex long contracts and 36,250 Comex short contracts, for a net short position of 10,825 contracts. This works out to each non-U.S. bank holding [on average] 492 Comex short contracts apiece.

It's as plain as day what's going on here. Two or three U.S. banks are sitting on the gold and silver prices...and the CFTC's own reports show that!!! [And the OCC's quarterly derivatives reports confirm it! - Ed] This is not rocket science...it's just plain common sense! Even Stevie Wonder could see this! But as my quote on Thursday said..."There are none so blind as those who will not see."

The link to the appropriate page in the Bank Participation Report is here. You have to scroll about two thirds of the way down the page to get to silver and gold...and it's oh so simple to read. The number on the far right represents the total open interest.

The Comex Delivery Report showed that 11 gold and 92 silver contracts were delivered yesterday. There were no changes to either GLD or SLV. The U.S. Mint updated its one-ounce gold eagle production numbers again. July minting now stands at 23,500. Silver eagle production was unchanged at 650,000. Over at the Comex-approved warehouses, 1,715,648 ounces of silver were brought into inventory.

The usual New York gold commentator had the following yesterday..."Both Mitsui-London and Standard Bank report a revival of physical interest on the lows yesterday, which Mitsui credits with supporting the price. Standard Bank further comments “...the buying momentum we observe with a gold price at $910 is at the same level as when the gold price was at $860-$870 in April. This is an indication that buyers of gold in the physical market are now willing to pay a higher price for gold than a few months ago. We believe that sellers of scrap gold now require a much higher gold price to part with their gold than in February.'"

Ever since that article appeared in Rolling Stone magazine about the "Giant vampire squid [Goldman Sachs] with its tentacles wrapped around the face of humanity"...GS has been in the news a lot of late...all of it having to do with a gentleman by the name of Sergey Aleynikov and some proprietary "black box" trading program. I have two stories on that subject today.

The first is from John Crudele at the New York Post. The headline pretty much expresses a lot of people's opinion of the company..."Influence is all in the bag for 'Government Sachs'"...and the link is here.

The second article is from Bloomberg. It's a commentary by columnist, Jonathan Weil, and bears the headline "Goldman Sachs Loses Grip on Its Doomsday Machine". I've got a sneaking suspicion that there will be lots more interesting disclosures made before this is all over. The link is here.

And lastly, and hopefully...most important, is this Reuters story that was filed yesterday afternoon. The lead paragraph reads "The CFTC looks eager to move quickly to implement trading limits on commodity and energy futures, leaving opponents little time to argue that the agency is going too far, too fast." Of course there were similar stories on this subject over the last couple of weeks...but the shocker was buried further down in this two-line paragraph..."During the interview, [CFTC Commissioner, Bart] Chilton said he strongly supported looking into position limits for metals, particularly gold and silver." "Chilton said he daily hears concerns about large positions being held in metals, particularly in silver and gold. Since last September, the CFTC’s enforcement division has joined other federal and international regulators in an investigation into potential manipulation and concentration of positions in the silver market, he added."

Although I'm not breaking out the party favours just yet...I must admit that these are astonishing comments to see in the main-stream media. And as I mentioned several commentaries ago, Ted Butler isn't surprised at all. Ever since this "position limits" issue arose, he's been of the opinion that the real object of this whole CFTC exercise has been for exactly one reason...and one reason only...to deal with the grotesque short position that currently exists in the silver market...the energy and wheat issues are just a big smoke screen. He could very well be right...and his last commentary deals with exactly this issue. If you want to refresh your memory on what Ted had to say...click here. Anyway, here's the original Reuters story that I was mentioning before I got off on that Ted Butler tangent. The link is here.

To the masses, the catchwords of Socialism sound enticing...so they will continue to work for Socialism, helping thereby to bring about the inevitable decline of the civilization which the nations of the West have taken thousands of years to build up. - Ludwig von Mises

Today's 'blast from the past' is a bit of a tear-jerker from the late 1960s. So grab a hanky, call up that old girlfriend, turn up the speakers...and then click here.

In the almost two years I've been writing this daily commentary, I've mentioned on several occasions that I must have been born in Missouri in another life. I was always skeptical about the CFTC/SEC ever making a move against the U.S. bullion banks that hold silver and gold prices in a vice-like grip. Now it could be a whole new ballgame in short order. Although I will still watch with suspicion...I must admit that if it comes to pass...this will obviously change everything. I am now on full alert...and watching how this all may play out in advance of any decision that is made...and I suggest you do the same.

Enjoy what's left of your weekend and I'll see you here on Tuesday morning. By the way, if you're looking for something to keep you off the streets for a while...click here.

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