From Ed Steer:

Yesterday's gold activity in world-wide trading on the Globex amounted to almost nothing. Volume was even lighter on Tuesday (which was a regular work day) than on Monday (which was a holiday). There wasn't much to read into the price activity. What little price excitement there was in either metal, got squashed moments after the Comex opened when the silver price went vertical.

However, the open interest numbers yesterday are well worth noting. I would think that these numbers represent Monday's trading and most of Friday's as well...as the o.i. numbers for Friday that were in my report on Tuesday morning...simply made no sense. With Monday being a holiday, the open interest numbers that were available probably didn't represent all the trading that went on. These most likely do. Gold o.i. fell another 11,463 contracts and silver o.i. contracted a further 4,056 contracts. It's been many moons since the o.i. has been at these levels in either metal. We are at the bottom of the barrel, and Friday's COT numbers will be worth printing off and saving for posterity...which is exactly what I'm going to do.

In gold news, the ECB reported that two of its captive banks had sold 7.59 tonnes of gold last week. And once again there were rumblings that the IMF's gold has been surreptitiously put into play....plus rumours of a non-signatory to the Central Bank Gold Agreement selling gold. If I had a dollar for every time I've heard the story about IMF gold sales, I wouldn't have to worry about what the price of gold and silver did, as I could retire on that alone. I also note that (despite the price trashing) GLD added 100,000 ounces on Friday.

Below is a graph that was in Bill Murphy's MIDAS commentary over at lemetropolecafe.com yesterday. It's data from the Office of the Comptroller of the Currency showing which American banks hold all the precious metals derivatives as of June 30/08. I get quite a few enquiries as to the identities of the '2 or 3' US banks that are holding the biggest gold and silver short positions on the Comex. This graph should tell you all you need to know. Both are market-making members of the LBMA as well.

click to enlarge

Here's a video that's worth watching. Somehow Martin Hennecke, senior manager of private clients at Tyche Group in Hong Kong, got invited back on CNBC the other day to talk about gold even though he mentioned manipulation of the gold price by central banks when CNBC last had him on the air a month ago. Hennecke mentions it again, and you can watch him at the CNBC Internet site. The link is here.

As my first story today, here's another compilation of all the evidence of a massive shortage of gold and silver in the real world amid a surplus of promises of metal on the commodities exchanges. It's posted at seekingalpha.com and comes from Toni Straka of The Prudent Investor, it's headlined "Bullion Shortage and Spot Prices Tell Two Different Gold Stories"...and the link is here
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And lastly, in another commentary posted today at seekingalpha.com, the Fat Prophets market research firm in New York, has taken note of the short position and carry trade in gold, the desire of central banks to suppress the gold price, paper gold's suppressive effect on the price of real gold, and sharply rising gold lease rates, indicating strain in the price suppression scheme. The Fat Prophets commentary is thus an indication that the real gold story is starting to get around in establishment circles. It's headlined "Gold: The Last Carry Trade" and the link is here.

Perhaps what we need, is to go back to the first Bretton Woods...to go back to discipline...as it's absolutely clear that financial markets need discipline: macroeconomic discipline, monetary discipline, market discipline. - European Central Bank President Jean-Claude Trichet, 13 October 2008...after speaking at the Economic Club of New York

What Monsieur Trichet speaks of, in the above quote from a Bloomberg story yesterday, is a return to the gold standard...in one form or another. And sooner or later, that's exactly what the world will be forced to do...as the economic, financial and monetary world we knew before 1971...cannot possibly be revived without it.

Charles de Gaulle (1890-1970) would have been pleased!

See you on Thursday.

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