From Ed Steer:

Both gold and silver got sold off the moment that Globex trading started on Monday morning in the Far East. This lasted until about an hour before trading began in New York. From that point, both metals started to rise, but got sold off hard at 9:00 a.m. NY time. Once a bottom was found in both metals, rallies ensued. However, the fun ended the moment that the LBMA in London closed for the day...and the NY boys went after both metals with a vengeance for about an hour. Then both metals rallied into the Comex close and were subsequently taken down in after-hours trading. There was very little volume on Monday, so it was pretty easy for anyone to push the prices around if they wished to do so...and they obviously did. The precious metals stocks didn't do well either. How are you enjoying these gold cartel-inspired 'summer doldrums'? Just asking.

After the bashing both gold and silver took last Thursday, one would think that the open interest numbers would be down for that day. Not so. Gold o.i. rose 6,559 contracts and silver o.i. went up 1,640 contracts. As I've said before, the boyz are sometimes a little tardy in their reporting of changes in open interest. It would be my bet that Thursday would have been one of those days.

Because of the US long weekend, the Commitment of Traders report wasn't released until yesterday. The news wasn't good. For the period ending July 3rd, the tech funds went long about 7,000 contracts in silver, with the bullion banks in the Commercial category pitching 3,249 longs and increasing their short position by 3,643 contracts. These are big numbers. It's obvious that tech funds went long and the bullion banks took the other side of the trade all the way up during last week's big rally...so it's the same old, same old. In gold, the numbers were even more horrendous. There, the tech funds added close to 32,500 contracts (net) to their long position, while the bullion banks in the Commercial category almost matched those numbers by pitching 6,158 of their longs and going short an additional 34,113 contracts. If you wish to follow along at home, the latest COT report is linked here.

In another long chat with Ted Butler yesterday, he advised that the current concentration ratios in both metals are as follows. As of last Tuesday's COT report, the bullion banks are short 79.4% and 81.3% of the entire Comex silver and gold markets respectively.

Unless something blows up somewhere else, these rallies in gold and silver may be over...because when the bullion banks have this many mice in their trap, the word needed to spring it is only a phone call away...so the summer doldrums may roll on until this situation is resolved. The '8 or less' bullion banks in the Commercial category are the only thing standing between the current prices of gold and silver and the prices going "to the moon"...as there isn't another group out there that's willing to short these obscene amounts of gold and silver. When you hold 80% of the short position in both metals...guess who calls the shots?

But, take heart from the graph below. All is not lost, as the trace continues to rise from lower left to upper right. It's just the speed of the rise I'm bitching about. I want a vertical line...and I want it now! How about you?

In other gold news, I see that the NYMEX is raising margin requirements for gold starting at the end of trading today...and Dennis Gartman sold his entire gold position yesterday...such as it was.

Paulson & Co. gave it their best shot early yesterday morning with a futures rally, dollar rally and the Dow up a 100 points at the open, but the news was so bad that the moment the intervention stopped, the Dow and US$ cratered, and the Dow lost about 240 points from its high. Paulson & Co.'s "Catch-a-Falling-Knife Company" swung into action again and actually had the Dow positive on the day...albeit briefly, but the news from Lehman was just too much and the Dow closed well off its highs.

The first story is from last week, and may have got lost in the US Independence Day festivities, which may have been the plan. Someone at the Fed has finally admitted that the official inflation figures are phony. The Reuters story is entitled "Fed's Bullard says bank's credibility on line". (Note to Bullard: The Fed never had any to begin with. - Ed) The link is here.

The second story is from Bloomberg. It looks like someone in the 'deep south' has finally cottoned on to the fact that TIPS aren't quite worth the paper they’re printed on. The story is entitled "TIPS Flunk Inflation Test as Fuel, Food Overtake CPI". The link is here.

The economic viability of so many businesses – and even industries – will be in jeopardy in the unfolding Credit and financial landscape. The stock market is still in the early stage of discounting the unfolding Credit and economic bust. And I’ll reiterate that we expect the unfolding economic adjustment to be of such a magnitude as to be classified as an economic depression as opposed to a more typical recession. - Doug Noland, prudentbear.com - 04 July 2008

Fannie and Freddie got smoked. So did Lehman Bros...in the last 10 minutes of trading. It appears that energy pricing agency Platts has put them on review, which effectively excludes them from trading benchmark-setting oil contracts. I also note that Indymac survived...barely. But it's only a shadow of its former self...as will the rest of the equity markets become in the months and years ahead. Today's 'action' will be interesting. Paulson & Co. will be busy.

See you tomorrow.