From Ed Steer:

Gold didn't do much of anything in Far East trading on Monday. There was a slight pop at the London open, but an hour later, gradual selling pressure showed up which lasted through the New York open on the Comex. Then shortly after London closed for the day, the lever got pulled...and we had another pretty waterfall decline...as the gold cartel collusively pulled their bids.

Silver was basically flat throughout the Far East and Europe, but it to got the rug pulled out from under it the same time as gold. A waterfall decline there too...but not as pretty as gold's.

Since the olympics are officially on...I'll grade the Kitco gold chart a 9.5...and silver an 8.6. Both metals would have ranked higher, but I was in no mood to hand out style points last night.

Open interest changes in both gold and silver fell into the 'unbelievable' category on Friday. Just to refresh your memory...gold was down about $12...and silver more than 90 cents! Yet gold o.i. rose 6,716 contracts and silver o.i. rose 2,106 contracts. For silver, that's five days in a row where open interest has risen while the metal price itself has been crushed by more that two bucks!

If...and it's a pretty big if...we assume that these o.i. numbers (for the last three weeks) are correct (and you can never trust these crooks) then there is only one possible explanation for higher open interest in the face of falling prices...and it is this: The tech funds are (collectively) putting on short contracts faster than they're pitching their longs...and the bullion banks are going long against them faster than they're covering their shorts. There is absolutely nothing else that would account for it...unless they're diddling with spread trades too. But in a massacre like this, spreads are pretty irrelevant. And it's my bet that they're lying their asses off in the Commitment of Traders report as well. Cut-off for Friday's COT is at the end of trading today. Will the boyz tell us the truth? We'll find out at 3:30 p.m. New York time...three days from now.

The usual New York commentator had this to say yesterday..."Reuters today has a story about Indian gold imports in July, rather misleading headlining the fact they were down 56% from 2007. Of course, world gold was $300+ dollars higher in July this year – almost 50%. More importantly a firmer rupee and almost $150 off the world gold price since last month make this ancient history: the more significant fact is that, at 30 tonnes, July's imports were 25% above June's Friday's down $13.10 Comex close was associated with a 6,910 lot (21.49 tonne) rise in open interest. A clear expression of confidence on the part of the bears."
"Gold's horrific $36.50 drop on Comex saw enormous volume: estimated at 207,758, with negligible switches. Any one who ever felt inclined to short gold based on a chart, must surely have done so."
"The consequence of this will be land office business by the Indian importers."

I was looking for a way to describe what's going on out there without using a half dozen paragraphs to get the job done. It was then that I discovered the following commentary (over at Bill Murphy's lemetropolecafe.com) by fellow Canadian, Peter Degraaf. He doesn't mind admitting that TA is pretty useless in the face of this kind of intervention...from his Friday evening e-mail: "Featured is the daily gold chart. Gold closed just above the $850 support line during a washout caused by the performance of a US dollar that defies belief. Without any improvement in fundamentals, the dollar rose 132 points today. The largest gain in years! Despite a banking crisis, low interest rates, huge deficits, money supply running in double digits, housing sector in shambles, the US dollar has now risen 8 out of the last 9 days. Someone please convince me that this is not rigged. Meanwhile at $855.00 the gold price is back at $323.00 expressed in 1980 dollars!"

I wonder what Peter had to say about yesterday's performance...now that gold is on sale for under $300 as expressed in 1980 dollars! Silver too! It's time to take out another mortgage on the house and buy as much physical as you can, as these fire sale prices won't be around forever.

The boyz really did it yesterday...they broke both metals below all technical resistance...which was probably their plan. Does this mean that gold is down for the count? Don't know. Charts don't mean much in a managed market. Is this the bottom? Don't know that either. Ted Butler and I have been guessing this bottom (wrongly) every day since the prices broke through the 200 day moving averages. How soon will it recover? Another good question for which neither Ted nor myself have any answer. But as I mentioned in previous commentaries...options expiry for August is the 26th...and September is a huge delivery month for silver. Can the crooks keep prices this low until then? Beats me.

Ted Butler also mentioned yesterday that silver...by any measurement...is the most oversold its ever been in its history. Here...as painful as it is to look at...is the 3-year silver chart. Please make careful note of the fact that when its this oversold...it ain't there for long! The link to the chart is here.

I only have one story today...as I've already taken up enough of your time. It's silver analyst Ted Butler's latest commentary entitled "Back To The Start"...and the link is here.

I am continually amazed at the lack of courage exhibited by mine management collectively in speaking up about the silver manipulation. What do they think that just caused the price of silver to drop 25%? Their lack of concern for their shareholders is deplorable, almost as shameful as the CFTC ignoring the manipulation. - Ted Butler, 11 August 2008

Just for information purposes, the short restriction rule ends tonight at midnight...and from what I've been told, it won't be renewed. Things could change rather suddenly now that the big financials are fair game for the shorts once again...or not!

And in closing, I see in early Far East trading this morning, that the boyz have both gold and silver on the ropes...again. As I said on Saturday, this type of price activity this early in the trading day is unprecedented! I must admit that I will switch my computer on this morning with a certain amount of fear and trepidation. Remember...there are no markets anymore...only interventions.

See you Wednesday.

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