From Ed Steer:

Gold was pretty flat in early Far East trading on Wednesday morning. That all ended midway through the Hong Kong session when the price shot up more than ten bucks. It went a bit higher in London, but you could tell that the rally was running into heavy resistance. The rally on the Comex open ran into the usual not-for-profit seller...and that was the high water mark for the day.

Silver followed a similar pattern, but its peak was in early London trading as the price was going parabolic. Another rally on the Comex open ran into the same not-for-profit seller who put up the stop sign in front of gold. Volume on the Comex wasn't particularly heavy in either metal.

The gold shares were something else again. This was the biggest percentage move in gold stocks I'd ever seen. You too, eh? I could hardly believe my eyes...and tapping the glass of computer monitor didn't change it any. Needless to say I was delighted to see it, but the part of me that's from Missouri looked at it with deep suspicion...like it was some sort of Trojan horse. Let's see...gold was up less than $20...and the Dow got killed. How come the gold shares didn't follow the equity markets this time? Did Joe Six-Pack suddenly find religion and run to gold equities...or are the insiders buying because: a) they expect an explosion in the gold price, or: b) they are buying them now to dump them on an even bigger rally later in order to kill it. As Ted Butler says, the boyz are the biggest criminals that you can imagine. Never underestimate them. And after eight years of this...I don't. So I'll remain sceptical...but optimistic...if that makes any sense.

I note that GLD was up about 18 tonnes yesterday...around 600,000 ounces. The SLV was down about 1.4 million ounces. Ted Butler said it "feels like a withdrawal, rather than liquidation."

In a Bloomberg story yesterday, the French Finance Minister said that "the ECB has offered unlimited liquidity at fixed rates to all banks." I see that the Fed is now talking about supporting the commercial paper market and taking equity positions in US banks. It looks like they're preparing to bankroll the entire US financial system all by themselves. In a related Bloomberg story yesterday..."It is the policy of the federal government to use all resources at its disposal to make our financial system stronger," Paulson said. "We will use all of the tools we've been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size." That's supposed to be good for us...right? George Orwell would be proud...



The first story today is from Ambrose Evans-Pritchard at The Telegraph in London. Even Ambrose admits that "Yes, this is US socialism" and that Washington "has taken over the entire credit system." But he also describes gold as a "super currency"...and his description of structured credit as a "dung heap" is right on the money. The story, entitled "Financial Crisis: Who will bail out the Euro?," is a 'must read' from start to finish. The link is here.

The second article is from John Hathaway over at Tocqueville Asset Management. He asks, "Is Gold Still in a Bull Market?," and concludes that this week's ample move upward is not just a head fake. Other supposed safe havens for capital, Hathaway writes, are failing or are likely to fail soon, including U.S. government bonds, which just a few decades ago were mocked as "guaranteed certificates of confiscation." That will leave gold standing alone, Hathaway predicts, with $1,000 per ounce acting as a floor rather than a ceiling. The link to John's preamble...and then to the article itself...is here.

It was obvious that yesterday's world-wide co-ordinated interest rate cut was a bust...at least judging from the performance of the Dow it was. With a fall below 9,000 imminent...the PPT had to act...and they did. But during the last hour of trading, they were nowhere to be found, and the Dow lost about 325 points to finish almost on its lows. Paulson Bernanke LLP will be all over this market again today.

See you Friday morning.

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