From Ed Steer:

Gold's peak price came at 3:00 a.m. Thursday morning New York time...while the thinly traded Hong Kong market was open...and less than half an hour before the London open. This time gold got sold off on the London a.m. fix. There was a spike bottom a few dollars below the $700 mark at 9:00 a.m. in New York. From there, gold rose quickly to about $726 right through the London p.m. fix...before running into the 'usual suspects' at the London close. There was huge price volatility yesterday, with inter-day price swings of $20 or $30...unheard of only months ago.

Then there's silver. The silver low came at precisely the same time as gold's...no surprise there. Silver really took off at the London p.m. gold fix. Its high for the day occurred at the London close. Then either JPMorgan or HSBC, USA hammered the price. Thursday was a hugely volatile day for silver too.

I'm not really sure what to read into one day's worth of trading. Normally this kind of price volatility occurs at major tops and bottoms, but with '2 or 3' US bullion banks supervising PM prices while the world's financial system implodes many times faster than the world's central banks can print money, it's really hard to make a call. Since today is Friday...and anything can, and probably will, happen...I'd rather reserve judgement until my Saturday rant.

The gold open interest for Wednesday fell 3,546 contracts to 315,926 contracts...which is 45% off its highs. The gold price (which is being caused by spec long liquidation on the Comex) is collapsing in the face of record investment demand. As for silver, it's o.i. actually rose 57 contracts...which is unbelievable since the price got smoked between Tuesday's and Wednesday's close! This mystery won't be solved until next Friday...Hallowe'en...when the relevant information from Wednesday will be in the COT report. Today's report will be out at 3:30 Eastern time and I'll have it for you on Saturday.

Not a lot of gold news today except what you saw in the price action. I see that Dennis Gartman is back into the gold market going long 'one unit' of gold. The last time he went long, it lasted a couple of hours. The usual NY commentator said..."On recent form, whatever stops set in this trade (Gartman) will make a short-term low in the gold price." Let's see how he makes out this time. GLD liquidated about 8 tonnes of gold yesterday and the SLV remained unchanged...again.

To show you how bad things really are, here's a graph of the Baltic Exchange Dry Index. I've been watching it every day for the last couple of weeks, but decided to post it today, because it has now fallen over 90% since its peak six months ago. That should tell you a lot about world trade.

click to enlarge

I have three stories today. The first one is from France, where "French president Nicolas Sarkozy has pledged "massive" state intervention to support his country's industry...defiantly ignoring European Union competition rules in the biggest shift in ideology in 40 years." The proposal received a chilly welcome in Berlin. The story is linked here.

The situation in Russia is said to be even more dire...where the next article says that "Russia's financial crisis is escalating with lightning speed." This story, like the previous one, is from The Telegraph in London. The headline reads "Russian default risk tops Iceland as crisis deepens" and the link is here.

The third story is also out of London. Rob Mackinlay of Financial Express, a financial information service, has taken detailed note of GATA's work in his report "Gold Conspiracy: Can You Afford to Ignore It?" There's lots of disagreement about that in the story as well, which is linked here.

Up to this point in this deflationary implosion, I thought I had a pretty decent handle on how things were unfolding. But as I read the above three stories yesterday, I began to realize that events are now moving so rapidly world-wide, that it's impossible for any one person, country, or government "leader" to either comprehend the situation...or do anything about it even if they could. That goes for the banking and monetary system as well. This has become a self-reinforcing negative feedback loop that's quickly spiralling down to total destruction in all directions.

As I hit the send button to my editor, I note that the US dollar is screaming to the upside, the Nikkei closed down 812 points, European markets are down hard...and the S&P futures are as ugly as they can get. Seat belts fastened and crash helmets on!

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.