From Ed Steer:

Gold's feeble attempt at a rally once the Globex opened in early Friday morning trading in the Far East, ran into the proverbial brick wall at the Hong Kong open. From there it just got downright ugly. The stock markets in Japan and Europe were being hammered, the US dollar was screaming to the upside, S&P futures were down big...and gold and silver were having the crap kicked out of them once again. I was awake (barely) and starring at the computer screen at the exact moment that the low price of $681 in gold (and about $8.65 in silver) was printed shortly before 4:00 a.m. local time here in Edmonton. Both these prices were new lows for the move. I crawled into bed with fear and trepidation as to what I would find when I turned on the computer when I got up.

Four hours later, I was hugely relieved to see that what I had witnessed earlier had been the bottom. The powerful rallies that began in both metals from that point did not run into any opposition at the Comex open, London p.m. fix...or the London close. As a matter of fact, shortly after the London close, both gold and silver prices took off to the upside like homesick angels. This lasted until the prices went vertical at precisely 12:30 in New York. Then, either JPMorgan or HSBC showed up to end the party. It's obvious that if they hadn't been there to cap that rally, there's no telling how high gold and silver would have gone. Pick some large numbers.

As far as open interest for Thursday's roller coaster session, gold o.i. was up a surprising 3,656 contracts...to 319,582. I wonder what weird combination of buying and selling Comex contracts produced that number? Silver was even more surprising...but in the other direction...with open interest falling 1,947 contracts...to 93,983. It will all be in next Friday's COT.

I was really delighted with the Commitment of Traders report a week ago Friday...but when the new one was released yesterday, I was amazed at how much things had improved since then. The bullion banks in the Commercial category improved their net short position in silver by 4,903 contracts. They did this by covering 2,242 shorts and going long an additional 2,661 contracts. They accomplished this at the expense of both the Non-Commerical tech funds and the small traders. The tech funds pitched 1,036 long positions and went short an additional 2,245 contracts, for a total change of 3,081 contracts. The difference came out of the Non-Reportable category (small traders)...where their net long position was reduced by 1,622 contracts. Total silver open interest fell 2,723 contracts (to 95,873 contracts) for the week which ended at the close of Comex trading on Tuesday the 21st.

In gold, the bullion banks in the Commercial category decreased their net short position by a very substantial 16,950 contracts. This they did by covering 8,838 shorts and going long an additional 8,112 contracts. Once again it was the tech funds in the Commercial category and the small traders in the Nonreportable category that was the food supply for the bullion banks as they rang the cash register the same old way. The tech funds tossed 5,142 longs and went short 2,481 contracts, for a total change of 7,623 contracts...and the small traders pitched 7,134 longs and went short a substantial 2,193 contracts, for a net change of 9,327 contracts. Open interest declined 4,024 contracts to 319,472. The link to the current COT is here.

And, without a doubt, the COT structure has improved even more since the Tuesday cut-off for Friday's report. In a telephone conversation with Ted Butler, he said that he would have to go back five or six years when silver was under $5/oz. to see a COT set up like this one. He feels (and I totally agree) that once the bullion banks have covered the last short they can possibly get, they won't be there to go short the next price rise. And if they're not, we'll have record silver and gold prices in a flash...along with the prices of a lot of other things. That might have occurred on Friday if JPMorgan/HSBC hadn't stepped in when they did.

In my commentary yesterday, I mentioned that the wild price swings we saw on Thursday were the sorts of price action that one would see at major tops and major bottoms. Well, it's my personal opinion that the lows for this move are now in for both gold and silver. Yesterday morning's price capitulation in both metals looked like a bottom to me, so I'm calling it the way I see it. The positive finish to the HUI (in stark contrast to the rest of the US equity markets) was further confirmation.

Speaking of yesterday's commentary...I ran a graph of the Baltic Dry Index...and in response, I got this e-mail from a reader (thanks Jim K.) that I thought was worth sharing..."at our meeting this morning a fellow rotarian who is a regional director for one of the biggest ocean shipping companies said that they are offering ‘free’ shipping to customers via container just to get the empty containers back and to keep the ships moving to get enough income to pay the bills. pretty dramatic stuff." Dramatic is hardly the word I would use! How about...terrifying!

Not a lot of gold news yesterday. The GLD was unchanged, but the SLV finally showed some movement...down two million ounces...to 219,722,000 ounces. The usual NY gold commentator says that India ex-duty premiums are now at such extreme levels that they're going to be importing record amounts of gold once again..."With the exception of the late August/early September period this year, premiums like this have never been seen since the Indian gold trade was liberalized in the late 1990s. Unless the Rupee defies the Reserve Bank and its huge FX reserves and weakens a great deal further, world gold will find massive support at this level. The limit for India's appetite for gold at an attractive price has never been plumbed." Al Korelin of Korelin Economics was kind enough to interview me again on Friday, and if you wish to listen, the link is here.

Today's first story is from barrons.com. The headline gets right to the point..."Taiwan Dumps Fannie, Freddie...and Uncle Sam?" The link is here.

Right across the Formosa Strait from Taiwan, lies the People's Republic of China. They too are not amused by the financial shenanigans of Uncle Sam's treasury department. This Reuters story entitled "U.S. has plundered world wealth with dollars - China Paper" is well worth reading from start to finish...and the link is here.

Shallow men believe in luck. Strong men believe in cause and effect. - Ralph Waldo Emerson

Today's 'blast from the past' was written in 1971 and released in 1972. According to Billboard ratings, the LP from which this hit sprang, was rated #2 among all albums charted during 1973. Turn up your speakers and click here.

Along with China and Taiwan, Russian Prime Minister Vladimir Putin (in a story in themoscowtimes.com) warned against buying US dollars on Wednesday as the ruble fell to its lowest level in two years against the currency. "It's a dubious business. It's not clear what will happen to the dollar," Putin said. He, and his Chinese peers, are absolutely correct. That's why you should be buying all the physical gold and silver you can get your hands on. This gift from JPMorgan and HSBC isn't going to last much longer.

Enjoy the rest of your weekend, and I'll see you here on Tuesday.

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