From Ed Steer:

Gold showed some real signs of life yesterday when London opened for trading, but shortly after 4:00 a.m. New York time on Thursday morning, with gold up $15, the selling started again...and it just went on and on with few breaks...until a bottom was put in at 8:00 p.m. last night. It was a $23 spread between the top and bottom of the 'trading range'. So far, the boyz haven't been able to break through the low of August 15th. Let's hope they don't.

The import doors into India have been literally torn off the hinges as the flood of gold into that country (and many others) continues without a break. Here's what the usual NY commentator had to say..."Reuters carries a story today quoting a Singapore dealer remarking...’The market is still short of physical gold at the moment’...and another story reports: ‘UBS...one of the largest gold dealers and the investment banks...said it had seen its strongest physical sales in the past 20 years over the last two weeks.’

"Since that covers the 1999 and 2001 lows, it's quite a statement, but it merely corroborates what the Indian premiums are saying.

"On Wednesday, the Comex tried and failed to pick up the downside momentum developed by an aggressive seller early in the UK day. Trading across a $14 range, Comex gold eventually finished down only $2.30. Open interest slipped 2,117 contracts (6.58 tonnes): modest, considering the intra day range.

"Today (Thursday) was a mirror image of yesterday (Wednesday) – world gold rallied strongly in the early European day, reaching almost $815 but then met a seller. It was beaten down in NY (virtually in lock step with oil) to close down $5. The range was $21.40 and estimated volume was 137,524 lots, with a switch effect of only 9,100 lots.

"Viewed from several angles, the gold market is currently in a remarkable condition. Perhaps most apposite is the question of what kind of seller would push gold down into 20 year highs of physical offtake, and refuse to scale up?”

I note in an AP story that South African gold production was down 10% in 2Q/08. As I've said before, world production of gold and silver could drop to zero tomorrow and it wouldn't affect their respective prices one iota if the boyz dictated otherwise. I see that the ECB has really clamped down on what kind of garbage they will accept in return for cash infusions into the banking system. Bank stocks in Europe got hammered yesterday. As bad as the situation is in Europe...it’s even worse in Britain. Troubled lenders in the UK may have tapped the Bank of England's emergency funding scheme for as much as $400 billion, according to investment bank UBS -- double the most aggressive estimates. And lastly, China's central bank is in trouble, as all the US$ denominated garbage (MBS, FNM, FRE) that they've purchased over the last few years, has declined in value so sharply, that its once considerable capital base has shrunk to insignificance. Now, even it needs an infusion of cash.

I have three stories today which just can't wait. The first of which is one that I haven't heard a word about in the American media, and deals with the political crisis in Ukraine. If you think that what's happening over there is irrelevant ...I urge you to reconsider. After the invasion of Georgia, there are brewing political upheavals waiting in the wings over in Eastern Europe...and this will be the first of several. The story is from The Times of London and is entitled "Ukraine government teeters amid President Yushechenko 'coup' claim". The link is here.

The story of the day yesterday came out of the mouth of Bill Gross at Pimco...and I still can't believe he said what he did. The words were "The U.S. government needs to start using more of its money to support markets to stem a burgeoning ‘financial tsunami’." The key word here is "more". Mr. Gross just admitted that he knows that the President's Working Group is busy these days propping everything up, but will have to work harder to support the markets to keep the whole system from imploding. The Bloomberg story is absolutely a 'must read' and is linked here. However, for those of you who believe that the precious metals (and other markets) are not managed...you can skip it.

Lastly, I give you some words of wisdom from a Canadian whose net worth is in the ten figures. I met Eric Sprott (Sprott Asset Management) once...and he was shockingly ordinary...as billionaires go. But in these trying times, which are affecting all of us, his commentary is soothing. I urge you to take the time to read it. It's entitled "The Phony Express" and is linked here.

According to the Pentagon's 2008 “Base Structure Report” (its annual unclassified
inventory of the real estate it owns or leases around the world), the US maintains 761 active military “sites” in foreign countries. The United States has 510,927 military service personnel deployed in 151 foreign countries. - Bill Buckler, the-privateer.com, September 1, 2008

Yesterday was an ugly one for the Dow and the Nasdaq...but the US$ did great!!! I urge you to buy as much physical gold and silver as you can find...and afford...and then take delivery! And don't forget, there are no markets anymore...only interventions. And if you don't believe me...just ask Bill Gross.

See you tomorrow.

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