From Ed Steer:

I wouldn't read a lot into the action in the gold market on Friday. It was just another day off the calendar...as Ted Butler would say. The only comment I would make is that the action in the gold price feels more like a top than a bottom.

Silver was a little more interesting, as it rose in price through the entire trading day, and finished virtually on its high of the day...and a new high for this move. Now the dichotomy between gold and silver is starting to show up in the price action, and not just the open interest numbers.

Speaking of open interest numbers, gold o.i. on Thursday fell 3,216 contracts to 391,144...on absolutely monstrous volume of 174,662 contracts. Silver's decline was much more modest...only 93 contracts to 96,309...on total volume of 18,664 contracts.

The Commitment of Traders report issued yesterday, was as expected. In silver, the bullion banks decreased their net short position by 1,522 contracts. This doesn't seem like a very big number, but it's impressive because o.i. fell in the face of a silver price that rose quite a bit during the reporting week. The full color COT report is linked here.

Gold o.i. was exactly as expected...with the bullion banks going short against every long...effectively stopping the gold rally in its tracks. The bullion banks increased their net short position by a staggering [but not surprising] 21,939 contracts. The bullion banks are now net short 204,226 contracts...20.4 million ounces. The full-color COT graph for gold is linked here.

We are now sitting with a COT structure that is bullish to very bullish for silver...and very bearish for gold. This situation has only existed a few times during the last ten years. Ted suggested [and not for the first time] that maybe 'da boyz' are trying to permanently separate silver and gold prices so that silver will rise independently of gold. That's possible...but we'll have to wait and see if it pans out that way.

The Comex Delivery Report for Friday showed that only 55 gold contracts were delivered...and nothing at all in silver. There were no changes in the alleged holdings of either GLD or SLV. The U.S. Mint has updated their production numbers in silver eagles again. This time they showed that another 275,000 silver eagles were minted...bringing the monthly total up to 2,300,000. Nothing was added for gold eagles. And the Comex-approved warehouses reported that 320,392 ounces of silver were withdrawn from their collective inventories.

The usual N.Y. gold commentator mentioned that The Gartman Letter's buy stop at $955 was not triggered yesterday because gold did not, in fact, trade long enough above that price to trigger its buy. He also had this..."There is a good deal of commotion today regarding forecasts that China will pass India in gold consumption in some five years. It is odd that so many observers extrapolate about the intensely volatile Indian gold market based on a few months recent history. At the time of the enormous imports last summer, the talk might well have been of India monopolizing the world gold stock! In any case, China’s gold production, bolstered by subsidized fuel and the hugely undervalued Yuan apparently supplies almost all local demand (India mines almost no gold). How seriously can one take the Shanghai Gold Exchange, which today reports that the gold contract is backed by only 156 kilos of metal? The Bloomberg story is headlined "China May Overtake India in Gold Demand, Council Says"..and the link is here."

The other day, several companies [i.e. Ford, eBay and AT&T] reported better than expected earnings and as a result, the stock market rallied on the news. While some companies have reported better than expected earnings for Q2/2009, others have struggled. Today's chart provides some perspective on the current earnings environment by focusing on 12-month, as reported, S&P 500 earnings. You can see how earnings are expected [38% of S&P 500 companies have reported for Q2/2009] to have declined over 98% since peaking in Q3/2007, making this by far the largest decline on record...and the data goes back to 1936. I thank P.S. for providing this data...which is all [including the chart] courtesy of www.chartoftheday.com ...the link to the website is here.

click to enlarge

Besides the Bloomberg story embedded in the usual N.Y. gold commentator's paragraph above, I have three other stories for your reading pleasure this weekend. The first is from yesterday's edition of The Economist out of London. It bears the headline "Here today, gone by 2010: Russia reserve fund is emptying fast.” The story is certainly worth the read...and I thank P.S. for sending it along. The link is here.

The next story is from the hallowed halls of the The New York Times. It's a story about high-frequency trading---which has become one of the most talked-about and mysterious forces in the markets. Casey Research's own Bud Conrad was circulating this story around the company yesterday...and I thought it worthy of your time. It's entitled "Stock Traders Find Speed Pays, in Milliseconds"...and the link is here.

The last story today is from commodityonline.com...and filed from Johannesburg. The title pretty much says it all..."New law boosts gold bar sale in South Africa." Until I read this story, I wasn't aware that South Africans were not allowed to own gold in bar form. You learn something new every day. The link is here.

Throughout all my years of investing, I've found that the big money was never made in the buying or the selling...the big money was made in the waiting. - Jesse Livermore

Today's 'blast from the past' goes back to 1972. I believe that this was their biggest, if not their only, hit. But what a hit it was. Turn up your speakers and then click here.

Something appears to be up in the gold and silver market...which the latest COT confirms. Further rallies in gold never amount to much when the bullion banks are short this amount of gold. Sure, I've seen their short position as high as 26 million ounces...which is 55,000 contracts higher than we are today...so I guess we can go higher, but the odds are not in our favor. How high we go from here [if we do go higher] depends entirely on whether the bullion banks are prepared to take on an even larger short position. But once that high [whatever, and whenever it is] is in, there is only one direction gold can go...down. Will silver go with it? Don't know, but Ted Butler says that they would have to get the price below its latest low, which is around $12.40...about $1.50 below where it closed yesterday...before there would be any more significant long liquidation by the tech funds and the small traders. The 200-day moving average is at $12.29. Ted doesn't think they can do it. We'll see.

I note in closing that this is the last edition of Casey's Daily Resource Plus. I hope that you have found it to be both educational and entertaining. Many parts of it will be shuffled off into other reports...and as most of you already know, I've been fortunate enough to be given my own daily stand-alone column. That honor is entirely because of you, dear reader...and for that, I'm grateful, appreciative...and thankful.

Enjoy the rest of your weekend and I'll see you next week with a brand new look...which I look forward to seeing for the first time myself...as I haven't seen it yet either.

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