From Ed Steer:

Gold and silver both showed decent strength throughout the Far East and into the European trading day on Tuesday. However, a few minutes before 8:00 a.m. New York time, the boys showed up and the waterfall declines were underway. This should be no surprise to you, because it was no surprise to me...as I've talked about little else for the last few days.

From their peaks in London trading...to their lows in New York... gold got smacked for around $30 and silver was nailed for about 80 cents. Silver punctured its 20-day moving average and closed below it, so I would suspect that quite a few tech funds were pitching their long positions while the bullion banks covered their shorts yesterday. If that's the case, and this is reported in a timely manner, then the open interest numbers for yesterday should show that when they are issued later this morning. As for gold, its 20-day moving average is sitting at $941...about $6 under the current spot price as I write this. I'm sure that there was some tech fund liquidation in gold yesterday, but it's too soon to tell how much. That too will have to wait until later this morning.

Open interest changes for Monday are as follows. Gold o.i. fell a bunch...down 20,110 contracts. Since the gold price didn't do much on Monday, it would be my bet that most of this number would be spreads being lifted. As for silver, o.i. dropped only 392 contracts...which would seem about right considering silver had a nothing day...just like gold did.

The well known NY gold commentator had this to say about Friday's and Monday's 'action'..."Today’s (Tuesday) ECB weekly condition statement reported a decline of E47 Mm of gold and gold receivables", which "reflected the sale of gold by one Eurosystem central bank": 2.47 tonnes. Last week's reported sale was 1.42 tonnes. The ECB group is lying low at present.

“Yesterday's (Monday) gains of $10 and more in Asian and early European trading were sharply reduced in early NY activity, with only a partial recovery subsequently being managed. A gain of $5.70 on the day saw, in a reversal of the recent pattern, a massive 20,110 lots (62.5 tonnes) being cut from open interest. Perhaps for once the initial impulse down really was a heavy (and clumsy) long liquidation.” (As I said, I think that this was mostly spread related. - Ed)

“A similar rally in Asian and European trading today (Tuesday) was met, shortly after the NY opening, with perhaps the most ferocious raid yet...in a banner year for these events. By 11a.m., an estimated 128,000 lots had traded, with some $20 sliced off the price: by the close, estimated volume was 218,000 contracts. The Comex floor closed down $15.10: e.g. a recovery of only $4 or so on unusually heavy late volume. (However) this performance was not one-sided.

"The promising momentum situation very early this morning led The Gartman Letter to add a ‘unit’ of $US gold to the two units of Eurogold it has been carrying since last week. (The latter survived: it has an E584 stop.) Some of gold's friends will find this amusing. However the frequency with which this experienced and commercially-driven Trader keeps getting caught like this, underlines the reliability with which circumstances which tempt a normal trader in the gold market to buy, in fact seem to trigger massive selling. By whom?"

Regardless of 'all of the above', the bullion banks are in the driver's seat at the moment...and with options expiry still three days away, it still has the potential to get even uglier to the downside than it already has. Make absolutely no mistake about it, there was nothing free-market about what happened in the gold and silver pits in New York on Tuesday.

The cut-off for this Friday's Commitment of Traders report was at the close of business yesterday, so what happens between now...options expiry on Friday, and next Tuesday's COT cut-off...won't be known until the following Friday...August 1st. So we'll be stuck with only daily open interest numbers to follow the bullion banks' antics.

In other developments yesterday, I see that E-Gold pleaded guilty to money laundering, US home prices tumbled 4.8% in May...and there's talk in the Russian media that "Combat aircraft could return to Cuba".

The first story today is from silver analyst Ted Butler. His commentary is actually '3-in-1'. His main commentary is entitled "A Modest Proposal" where he discusses the need to totally abandon all short selling. The second 4-paragraph commentary is entitled "On the Edge"...where he delves into the (very) ugly recesses of the latest COT. But the really interesting one he saves 'till the end, and is entitled "An ‘Outing’ by the CFTC" where he explains the astounding (and as yet unpublicized) story about the internal goings-on in the crude oil market. Ted's essay(s) are definitely worth the read this week, and the link is here.

The second story today is from my very good friend John Embry, chief investment strategist for Sprott Asset Management in Toronto. His commentary, originally written for Investor's Digest of Canada, is entitled "Gold's strength is the U.S. dollar's weakness"...and the pdf file is linked here.

There are no markets anymore...only interventions. - Chris Powell, Gold Anti-Trust Action Committee, Inc.

Just when I thought that market intervention couldn't get any worse...or any more blatant...it does! Tuesday's 'action' in all markets was one for the record books. The President's Working Group was everywhere. The Chris Powell quote above is prescient...and no further comments are necessary.

I hope your Wednesday goes well, and I'll see you here tomorrow.