From Ed Steer:

True to form...and right on schedule...a seller showed up at exactly 3:00 a.m. New York time, and the selloff began in both gold and silver. They either weren't trying very hard, or this was this best they could do...which wasn't a lot. Gold was off about $15 from it's 3:00 a.m. peak, but silver recovered a lot of its losses...such as they were. I wouldn't read a lot into Thursday's activity until we have a few more trading days under our belts and a short-term pattern develops.

Open interest numbers for Wednesday's trading are unusual. Gold o.i. dropped a hefty 13,808 contracts. In a conversation with Ted Butler, he advised me that most of this was lifting of a bunch of butterfly spreads. When spreads are closed out, both a long and a short are extinguished, and o.i. naturally falls. And despite a 20-cent rise in the price of silver on Wednesday, o.i. actually dropped by 228 contracts. With first day notice a week from today, there will be lots of activity as traders either close out their positions or switch them to future months. One would hope that next week's COT report should have all this current activity in it.

But despite all these changes in open interest and the rise and fall of the silver and gold prices, don't forget that '8 or less' traders are short 75+% of the entire Comex market in both these metals. As Ted Butler said in his latest commentary..."They are, quite literally, the biggest fish in the smallest pond in financial history. They are trapped. Their motive couldn't be more simple, or compelling - they are postponing delivering actual silver because it doesn't exist and delaying buying back their short positions because to do so will destroy them financially." And that, dear readers, is the current situation in a nutshell. A clearer picture could not be painted. It boggles the mind that some people just can't understand something this simple...but there are lots of them out there.

Here's a look at the current silver chart...and the gold chart is identical. Are the boys trying to engineer a top here...paint the charts? If they are, it wouldn't be the first time that a big rally to the upside 'failed' under mysterious circumstances right after the 50-day moving averages were breached to the upside...and long before the RSI flashed any kind of oversold signal. As I said yesterday, they can pull the lever any time them want, despite the number of mice (tech longs) they've got in the trap. The silver chart is linked here.

I see in a miningweekly.com article that “Gold Fields Ltd, the world's No. 4 gold producer, has cut its gold output forecast for this year by 15 percent, because of power shortages in South Africa.”
The company now expects to produce about 3.6-million ounces of gold, down from a previous target of 4.25-million ounces.
"We're probably going to miss (the target) by about half a million ounces," Gold Fields CEO Nick Holland told Reuters at a gold conference in Peru. "I suspect we're going to be 3.6 ... something like that." I'm sure that GF won't be the only SA company 'fessing up' this year.
In the news department today, it was another embarrassment of riches. We've all heard the expression "How to win friends and influence people"...or the Einstein quote about the universe, hydrogen and human stupidity. This Reuters story is exactly like that, and is entitled "House Passes bill to sue OPEC over oil price." I couldn't believe it either...but the link is here, so fill yer boots!

The second story drags corporate debt default kicking and screaming into the naked light of day. This Bloomberg story points out that defaults so far this year have already surpassed all the corporate debt defaults from 2007...and we aren't even half way through the year yet. I expect this trend to accelerate. The headline reads "Corporate Defaults Reach 28, Exceeding Total for 2007"...and the story is linked here.

And in closing, I see that Jefferson County in Alabama is having some serious problems in the credit market. This story surfaced earlier this year, but now it has turned really ugly. There are some unbelievable creepy-crawlies coming out of the woodwork down there, and I'll have that story tomorrow.

Today is Friday. Expect anything...and all of us at Casey's Daily Resource Plus will be here to discuss it Saturday morning.

And to all my American readers...I hope you have a happy and safe Memorial Day long weekend.

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