From Ed Steer:

Both silver and gold didn't do much in early Far East trading, but starting shortly after midnight Wednesday (New York time), a gentle selloff began which ended about an hour before trading started on the Comex in New York. This rally lasted until a few minutes after 9:00 a.m. when the boyz showed up...and that was it for the day for gold. Silver tried to rally a couple of times during the New York session, but both rallies were sold off. Both metals closed almost on their lows of the day.

The 20-day moving average for gold was taken out with a vengeance, but the 50-day m.a. did not fall...but is well within range...currently sitting at $913. On the other hand, silver did take out its 50-day moving average, and now the 200-day m.a. is well within range at $16.63. Can the bullion banks do it? Sure...as they certainly have the ability...plus a huge short positions in both metals that they'd love to cover. I have been informed that options expiry is Monday...not Friday...as I've been touting all week, so the boyz have an extra day to work their magic. In the last seven trading days they've managed to get gold down about $68...and silver $2 and change. The rest of the moving averages are but a chip shot away...and they've got three more days to do it.

Tuesday's open interest for gold only showed a fall of 1,062 contracts. Since the 20-day moving average wasn't taken out until Wednesday's trading, we won't see big drops in open interest until we see Wednesday's numbers later this morning...and even then, the bullion banks can cover their tracks by going long against their own short position, as this offsets their shorts, and actually increases open interest. They're pretty good at hiding their tracks in both gold and silver. As I said yesterday, what happens in the next three or four days won't show up until the COT on August 1st. By that time, this whole down move will probably be over and prices could be rising again, like they were the day after options expiry in June.

Silver open interest showed a drop of 1,848 contracts. Silver's 20-day moving average was taken out on Tuesday, so this decrease is not a surprise. We should see a larger number for Wednesday since the 50-day m.a. fell very early in the trading day. We'll see.

The prominent NY gold commentator had this to say... “Yesterday’s (Tuesday's) defeated breakout attempt and subsequent down $15.20 rout on Comex saw open interest fall only 1,062 lots, or 3.3 tonnes. Since there must have been considerable stop-loss selling by longs, such a modest fall suggests that the primary force yesterday was fresh selling.” (As I said above, it could be the bullion banks going long against their own short positions that creates this situation. - Ed)

“The wire services are excited by the 2% (15.33 tonne) fall in the GLD gold ETF gold holdings. However, since these holdings had been virtually static through the previous 7 business days, the most that can be said, is that the relationship between their size and gold price action, remains peculiar.

“The Gartman Letter, which was not amused by yesterday’s gold action, did not directly say if it was selling the unstopped $US gold it bought the day before. One presumes so. More significantly, the post-floor trade closing assault on gold appears to have triggered the E584 stop on the two units bought some days ago. This would not be the first time (that the) triggering (of) a deep TGL stop, put in the bottom of a raid.”

(Note to Mr. Gartman...Dennis, you did the same thing last month...went long a week before options expiry and were stopped out within an hour. I offer the same advice now as I did last month...go long the day after options expiry and you'll be OK. You can thank me later. My consulting fee is 5% of your profits...very reasonable. Please e-mail me and I'll tell you where to mail the cheque...LOL!)

I talk about the boyz, the PPT, the bullion banks as if they are one. In some ways they are...because they are all interfering with a free market...each in their own area of influence. The '8 or less' and '4 or less' traders in gold and silver in the Commercial category of the Commitment of Traders are pretty much guaranteed to be made up mostly of the 'market makers' on the LBMA. Right now these traders have a short-side corner on gold and silver, as they are currently short between 75-80% of the entire Comex market in both metals.

I see in a Reuters story that Iran has said that they will not "retreat one iota" over their disputed nuclear program. In a Bloomberg story, the headline reads "GM, Ford 'On the Verge of Bankruptcy,' Altman Says". Altman is a finance professor at New York University's Stern school of Business. Senator Jim Bunning told it like it was when he said that Fannie, Freddie Rescue Plan May Cost $1 Trillion. That will turn out to be a conservative number too...considering that foreclosures in California soared 33% from the 1st quarter of 2008, and are running 261% ahead of year-ago levels.

Only one item today. It's a currency intervention story from Reuters and it's filed out of London. The title is "In FX casino, don't bet against the central banks". With interventions in just about every market these days, it's hard to believe that there are still people out there that believe the gold and silver markets aren't managed as well. As Bill Buckler at the-privateer.com says continuously...."The global paper currency system is very young. It depends for its continued functioning on the belief that the debt upon which it is based will, someday, be repaid. The one thing, above all others, that could shake that faith, and therefore the foundations of the modern financial system itself, is a rise (especially a sharp rise) in the U.S. Dollar price of gold." The link to the Reuters story is here.

Nothing beats a little cash in a bear market, of course, and the oldest form of cash is gold. - James Grant

The day to day machinations in the equity markets no longer mean a thing. It's time to circle the wagons. Buy as much physical gold and silver...plus quality mining stocks that you can afford the day after options expiry...and then hang on for dear life. Alice in Wonderland has nothing on this.

See you on Friday.

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