From Ed Steer:

I'm not going to try and read anything into yesterday's gold and silver price action except to say that it was 'choppy'. However, another sharp selloff began the moment that the Globex markets opened in the Far East this morning. The difference this time was that there was no hint of a rally in either metal as there had been in the days prior.

Once again, it's all eyes on the open interest numbers. Monday's huge rise in price in both metals was once again a short covering rally! This is at least the third day in a row where we've seen huge price moves to the upside combined with falling open interest. There's one, and only one, explanation for this...the '2 or 3' bullion banks are short covering like their lives depended on it...and they just might. On Monday, gold open interest fell another 5,735 contracts and silver o.i. was down 2,115 contracts. These are really big numbers. Ted Butler gets into this issue in much more detail in his article linked further down.

GLD added another 500,000 ounces yesterday, making that 3.5 million ounces ($3 billion) in less than a week. SLV scraped up another million oz. yesterday, making that 7 million in a week...far less than gold. Butler still thinks they are having trouble getting the silver. By the way the Swiss silver ETF is up to 26.3 million oz...up one million...and the London version added almost 700,000 oz. to 13.7 million ounces.

The Central Fund of Canada raised about $129 million in their latest underwriting agreement with CIBC World Markets, Inc....11.9 million shares @ US$10.80. That translates into around 3.5 million ounces of silver...give or take...and about 70,000 ounces of gold.

The usual NY commentator had the following insights yesterday..."Tuesday’s ECB (European Central Bank) weekly statement reported a decline of E55Mm in ‘gold and gold receivables’ (2.89 tonnes at the latest book value). This was attributed to sales by two captive central banks. Last week's disposal was 1.53 tonnes. The ECB group appears determined to avoid headlines or decisive action in the world bullion market."

Two stories today. The first is from Bloomberg News Service and quotes John Hathaway of Tocqueville Asset Management, who says that "Gold will be the main beneficiary as concern about the U.S. government's Wall Street bailout triggers a plunge in the U.S. dollar." The link is here.

Silver analyst Ted Butler's new essay comments on short selling, big goings-on with Swiss banks and silver...and signs of short covering by the biggest shorts in silver. Butler's essay is headlined "Time Out or About Time?". The link is here.

We know we are in trouble when the Chinese Communist Party sound like bastions of sound money policy and fiscal conservatism in comparison to the Bush administration and the Federal Reserve; who, in creating more money out of thin air, continue to bail out their friends on Wall Street while the economic future of hundreds of millions of American citizens is sold down the river. - Paul J. Watson/Yihan Dai, prisonplanet.com, 19 September '08

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The Dow was heading for the nether parts of the earth again yesterday around 2 p.m., but there were gentle, and very obvious, hands there to help out once again. But in the end, it was all for naught...as these hands disappeared as fast as they arrived. The pricing mechanism for everything is so distorted now, it's hard to believe anything you see anymore...and I don't.

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.