From Ed Steer:

With one very minor exception, gold has been down on every Monday since this correction began during the first week of June. I woke up yesterday morning expecting the same...and it hadn't happened. Most of Monday's trading in the Far East and London was basically noise. The low price for the day was at one of the usual times...the London p.m. fix at 3:00 p.m...10:00 a.m. in New York. And from there, wonder of wonders, both gold and silver took off to the upside. This had all the signs of a short-covering rally. The usual N.Y. commentator thought so, too. Here's the Kitco gold graph from Monday. Because of the scale, the rally looked more impressive than it really was.

click to enlarge

As per usual...the party ended the moment that floor trading on the Comex was through for the day at 1:30 p.m. During that time, only the New York bullion banks are allowed to play...and they were obviously not amused with the previous 90 minutes worth of market action. They kept the gold price on its heels until the close of Monday trading at 5:15 p.m. Then they closed for 45 minutes before the beginning of early Far East trading on Tuesday morning. As you can readily see, the U.S. bullion banks control the tone/price of the gold and silver market at the close of one day...and the beginning of the next.

Silver followed along in lock step...and its low was at the London p.m. fix as well...with the rally ending at the same time as gold's. This dynamic also occurred in the platinum and palladium markets during the same time-period.

I was kind of hoping that Friday's open interest numbers would show some sort of positive surprise, but alas, they did not. Gold open interest rose 1,206 contracts to 368,115...on volume of 89,087, which is decent. In silver, o.i. rose a largish 1,505 contracts to 100,314. Volume was a chunky 28,517 contracts. After last Wednesday's price bashing in both metals, both Ted Butler and I were expecting a much bigger open interest improvement than what was indicated, and I was sort of hoping they would show up in Friday's numbers which, of course, they didn't. It's entirely possible that the bullion banks could have gone long instead of covering shorts...which they do quite a bit to hide their tracks...and they would be the only explanation for why o.i. was higher for both metals.

Today is cut-off for Friday's Commitment of Traders report...so let's see what kind of damage [if any] they inflict between the time you read this, and the N.Y. close. All of the bullion bank's shenanigans of the last five business days will be in this Friday's report, so we'll find out soon enough how big an improvement we really got since the prior Tuesday's cut off.

The Comex Delivery Report yesterday showed that 53 gold and 80 silver contracts were delivered. There were no reported changes in the alleged holdings of either GLD or SLV on Monday. Over in Switzerland...the Zürcher Kantonalbank has provided the weekly update to their gold and silver ETFs...which really do have the physical they say they do. Their gold ETF rose a smallish 3,428 ounces...and their silver ETF added 360,314 ounces. As always, I thank Carl Loeb for those numbers. The U.S. Mint also provided an update yesterday...and they've been busy. Their one-ounce gold eagle mintings rose another 6,000 to 29,500 for the month...and silver eagle mintings rose a very chunky 425,000 since their report last week, and now stand at 1,075,000 for the month. The Comex-approved warehouses reported that they had a net increase of a rather smallish 68,617 ounces of silver last Friday.

The usual N.Y. commentator had a fair amount to say worth noting...and here it is..."The Indian rupee was exceptionally volatile today...Import dealings must have been difficult, but once again it appears that intermittently India is a bidder for global gold...How the rupee behaves right now is critical to world gold. As noted last night, Vietnam physical gold stood at a $15.65 premium to world gold." [Smuggling has probably returned with a vengeance. - Ed]

"Standard Bank this morning remarked on 'very good support out of Asia since Friday' and MKS comments of seeing demand from Asia and the Middle East. They specifically note a revival of Turkish demand. TOCOM [Tokyo Commodity Exchange] was not impressed...as the public apparently cut 2.7 tonnes from their long position."

"Gold staged a powerful rebound starting just before 10 a.m. NY time today. Some $14 was added in a move which stopped precisely at the Comex floor close. In a reversion to a formerly regular pattern, estimated volume jumped 22% in the last half hour [less than a tenth of the trading day] indicative of a contested close. Eurogold kept pace almost precisely: this was real buying...estimated volume was a considerable 110,335 lots.”

"On my view of gold, efforts to drive the metal down towards $900 have been blocked by non-Western buying of physical. ScotiaMocatta speaks of 'good buying' on the lows today. The character of the preponderant buyer on Comex today will have to wait for the open interest data, but given the commotion in the equity market, the likelihood must be an alarmed short." [Amen to that open interest data! - Ed]

"In a Reuters story discussing the Obama Administration's efforts to put politics in command of the commodity markets, CFTC Commissioner Bart Chilton was quoted: 'During the interview, Chilton said he strongly supported looking into position limits for metals, particularly gold and silver.' This will disappoint those hoping the precious metals would be exempt in this march back to the mid-20th Century: others believe their markets have been politicized already since at least the 90s."

In other gold news, I see that the U.S. Mint has once again suspended production of more gold products. The story showed up at the prudentinvestor.com...and the link is here.

Because of the weekend, I have a 'reasonable' number of stories for you today. The first one is a real hoot...and I thank reader Clayton McBride for sending it along. It's a story out of the mirror.co.uk in London. It appears that the "cash-strapped Spanish government has ordered its navy to look for huge gold reserves that were lost at sea in the 16th century." The headline reads "Spain Seeks Sunken Treasure"...and the link is here.

Just about everyone in Christendom knows that Ron Paul is trying to get an audit of the Federal Reserve...and has a bill in front of the House of Representatives to accomplish just that. And as you also may know, he's run into some opposition. Mike "Mish" Shedlock has this hilarious Star Wars parody of it...and the link is here. Ron Paul also has his own commentary out on this issue entitled "Fed Independence or Fed Secrecy?". The link for that story is here. May The Force be with him!

One of my 'must reads' every Friday night can be found over at my good friend David Tice's Prudent Bear website. It's Doug Noland's Credit Bubble Bulletin. I never miss reading it...ever! Last Friday's commentary is noteworthy because Doug delves into the CFTC's new area of interest...position limits...an area that's received some ink in this column as of late. I urge you to read this commentary, as it puts another slant on the whole issue. It's entitled "Speculator: Policymaker Foe or Friend?". You'll have to scroll down almost to the bottom of the page to get to the essay itself...and it's well worth the read. The link is here.

In commentary out of the Financial Times in London, comes this piece by Terrence Keeley. Keeley is global head of sovereign client services at UBS Investment Bank. The headline reads "Central bankers return to gold and dollars" and the link is here.

And lastly comes this story. I like to save the best [at least what I think is the best] to the last. This story certainly qualifies. It's from themoscowtimes.com and is entitled "Medvedev Shows Off Future World Money". The photo that accompanies the article is great...another photo op with Dmitry holding gold. The coin looks a like it's about 1-ounce in size...but since it was designed in Europe, it's equally likely to be in grams. But it doesn't say what the purity is...but, in just eye-balling it, probably pretty high would be my guess. And, just in case you miss it, I must point out the most important paragraph, and here it is..."Examples of the coin, worth $3,900 and produced by the United Future World Currency, a group backing the idea of a global currency, was presented to all world leaders attending the Group of Eight summit in L’Aquila, Italy." Gee...a gold coin that size worth $3,900!!! I wonder what the gold price will have to be to make that happen? Just asking. The story is a must read and the link is here.

click to enlarge

Fiat money, in extremis, is accepted by nobody. Gold is always accepted. Alan Greenspan, May 1999

I must admit that yesterday's activity in both gold and silver was a bit of a surprise. But, as I mentioned on Saturday, this 'position limits' issue being bandied about by the CFTC has really muddied the waters. I'm cautiously optimistic that this issue will be settled to the benefit of the producers and their long-suffering stockholders. But, knowing that the CFTC et al are not interested in doing what's right...I fear the worst...so I'm always on the lookout for an "in your ear" scenario. The huge Comex short position that still exists in both gold and silver...especially gold...still has me deeply concerned. Trying to take both of these factors into consideration at this time of huge financial and monetary stresses throughout the world in general...and with the U.S. dollar in particular...is an all-but-impossible task. This is Terra incognita for all of us...and I must admit that until some [or all] of these conditions resolve themselves to a certain extent, calling the precious metals market in the next month or so is going to get interesting.

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.