From Ed Steer:
In my commentary yesterday, I mentioned that I was less than thrilled with the sell-off in the early Friday morning markets in the Far East, as this sort of price action to the downside was virtually unheard of during those trading hours. As it turns out, it wasn't a good omen.

The selling started in earnest at 3:00 a.m. NY time on the Globex after Sydney closed and Hong Kong was the only market open. The bottom came at just over $850 in New York trading...which is a retest of the May/08 low. Will it hold? We'll find out next week.

Silver suffered a worse fate. The price broke through all support on Friday, as stops were tripped and margin calls went out and long positions liquidated. If you're a technician, the next level of support is around $13.75...however, technical analysis means squat in a managed market like silver and gold. Will the current price hold? Once again, we'll find out next week.

On Thursday, gold o.i fell a stunning 26,573 contracts as the liquidation continued. And silver, for the fourth day in a row, showed a rise in open interest of 1,592 contracts.

There are no shades of grey here. What's happening is that the '8 or less' traders...the bullion banks...are covering shorts, while the tech funds are pitching their longs...but they (the tech funds) are not going short. There were no signs of that whatsoever in the latest COT report...even though the o.i. in silver has risen the first four days of this past week. Something does not compute!

In gold, for positions held at the end of trading on August 5th, the tech funds in the Non-Commercial category decreased their long position by 19,757 and also covered 1,166 shorts, for a net decrease in long position of 18,591 contracts. On the other side of the ledger, the cartel closed out 12,008 long positions and a whopping 32,762 short positions for a net decrease of 20,756 contracts in their short position.

In silver, the tech funds sold 3,416 longs and 772 short positions for a net decrease in long position of 2,644 contracts...and the boyz went long an additional 2,006 contracts plus covered 2,390 short positions for a net decrease of 4,396 contracts in their short position. The latest COT report is linked here.

Ted Butler said that he was disappointed in this report. He was expecting much better. So was I, but as I've mentioned previously, it wouldn't surprise me in the slightest if the boyz didn't report everything that they should have...and I don't think they did. Silver is a case in point, as the COT shows nothing of the rapidly rising o.i. we've had this week against a back drop of precipitously falling prices.

Without question, there has been massive short covering by the Cartel since the Tuesday cut-off which won't be shown until the next COT report on August 15th. Along with the information that they withheld from this week's report, next Friday's offering should be quite something.

Ted Butler said that the only way that a sell-off like this can occur is if there is collusion amongst the largest traders in the Commercial category. He also said that you should never underestimate these crooks (especially when a bunch of crooks is this smart) when they're in the same room as you...and you should keep your hand on your wallet at all times. Everyone who has watched the precious metals markets for the last number of years, should have caught on to their tactics by now, but obviously some people have a learning disability. There is absolutely nothing free market about what we're witnessing right now...and there's absolutely nothing you can do about it, as the regulators and the mining companies just stand there with their hands in the their pockets while us shareholders get killed.

As I mentioned in my closing remarks yesterday...when the dollar 'rally' ends, then the next leg of the precious metals bull market will commence. I wasn't the only person that was deeply suspicious about this sudden resurgence in the fortunes of the US dollar. James Turk over at goldmoney.com was too. He discovered the reason why the dollar has a new lease on life. It's called 'intervention'. Needless to say, the precious metals were in a major rally at that time...and, of course, had their peak prices on exactly the same day the dollar bottomed...July 15th. The story is entitled "Mystery Solved" and the link is here.

My second story today is from Bloomberg. Normally they never put up any kind of story on gold, but I was up in the wee hours of Friday morning while North America was asleep, and I found this story posted. I'm glad that I grabbed it, because half an hour later it had been taken down from their home page. The story is entitled "Gold, Oil Ratio 'Out of Whack' After Declines: Chart of the Day". The link is here.

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

Today's 'blast from the past' is from the 50s and the 60s. Turn up your speakers and then click here.

The global political, economic, financial and monetary situation continues to deteriorate by the day. Governments (mostly the US) are trying to prevent the inevitable. With the news out of India and Turkey that physical gold buying has soared on this price decline, I think that gold and silver's days at these price levels are numbered. As the usual New York commentator said yesterday..."Thursday's Comex open interest (decline) of 26,574 contracts (82.65 tonnes) has rarely, if ever, been matched...Clearly highly abnormal and virtually unanalysable forces are abroad in the gold market."

But please don't ever forget the fact that as long as the bullion banks...the '8 or less' traders in the Commercial category...continue to operate as they have been, both gold and silver will continue to have their prices 'managed'. We'll find out on the next price rally if it's "business as usual" for the boyz...or not.

See you on Tuesday morning.

Casey Research's correspondent-at-large Ed Steer is a keen observer of the financial markets and a board member of Gata.org