From Ed Steer:

Checking any gold or silver chart, it's obvious that these two metals followed the same price track on Monday as they did on Friday. Coincidence? This time the peak price was shortly after Hong Kong opened and the bottom was shortly before Hong Kong closed. Then they rose in fits and starts until shortly before the Comex close in New York, where the usual not-for-profit seller gently tapped on the brakes...and then took them down in after-hours trading on the Globex. Volume wasn't particularly heavy on Monday. Here's the Kitco gold chart.

click to enlarge

I failed to point out in Saturday's commentary that the spot gold price put in an "outside reversal day" on Friday. That is, a lower low...but a higher high...and a higher close than on Thursday. Never in this bull market in gold, have the boyz ever allowed this bullish technical indicator to become a self-fulfilling prophecy. They have always snuffed out any follow-through in the next day's trading...which is what they did yesterday.

There are a few obstacles in the path of any recovery in either gold or silver at the moment. The FOMC meeting today and tomorrow...options expiry on the Comex in both gold and silver is tomorrow...OTC on Thursday...and first day notice for delivery into the November contract is on Friday. Also, today is Diwali...a national holiday in India...so (despite monstrous Indian demand) the usual heavy buyers won't be around. And let's not forget the elections in the US. I would be really surprised if there's a major move to the upside in anything until all of this is out of the way...but hey...anything can happen in this bizarro world we live in now!

On the move to new record low prices on Friday, open interest showed another decline in both metals. In gold, o.i. dropped 1,666 contracts to 317,916...and silver o.i. slid 259 contracts to 93,724. Both numbers are multi-year lows. The 2 U.S. bullion banks are finding the pickings pretty slim, as the vast majority of speculative longs have already been flushed from the Comex.

And from commentary over at lemetropolecafe.com, I note that the seven largest gold shorts on the TOCOM are within days of reducing their net short position to zero. Goldman Sachs is now actually net long. It's taken all of them about three years to go from a massive short position to where they are now...out of harm’s way on the next price rise...whenever that is. Contracts on the TOCOM are kilo bars...not 400 oz. Comex good delivery bars...but nonetheless, the short position of these traders was substantial three years ago.

There's a fair amount of gold and silver news today. A Monday headline in The Times from London reads "Vietnamese seek the security of gold". Another headline from The Times..."Threat to gold mines as Zimbabwe Reserve Bank fails to pay up". "The failure by the Reserve Bank to pay for gold delivered to it has decimated the gold industry,” said the Chamber of Mines. Monthly gold production has been reduced to just 267 kg compared to 2,259 kg a decade ago." And from business.standard.com in India "Gold sales jump 50% as buyers line up on Dhanteras"..."An estimate said the gold sales in the country on Sunday was 90 tonnes as compared to 60 tonnes on the same festival day last year. Dhanteras is a holiday on the Hindu calendar which ushers in the festival of lights, which is celebrated with the purchase of precious metals as a form of good luck." And lastly...tucked away at the end of a story (which is where the mineweb.com always puts the most bullish news) is this World Gold Council gold mine production data..."(world) mine production declined by a further 4% year/year in the 2Q/08 to 590 tonnes...bringing production in the first half of the year to 1,133 tonnes...6% lower than production in the first half of 2007." These are huge declines!

Oops! One more thing. From the usual NY commentator yesterday..."UBS remarks today that Friday saw the best Indian buying in 6 weeks – i.e. early September, when ex-duty premiums of this magnitude were last seen. Even more remarkable, reliable reports are in hand of silver being flown to India, an extremely rare event. Silver premiums do in fact suggest this is plausible. Even with the soft rupee, India is now confronting the bears in both metals with a barrier which will probably be insuperable."

It was an ultra-newsy weekend...and it pains me to narrow it down to only three stories. But I must...and I will. The first one is from Ambrose Evans-Pritchard at The Telegraph in London. The headline says it all..."Europe on the brink of currency crisis meltdown"...and indeed it is. The story is definitely worth your time, and the link is here.

The second story is also from Evans-Pritchard...and it's a big surprise. The IMF can actually finance itself through a bond issue in its own name...or through SDRs...Special Drawing Rights. SDRs are a special fiat currency that the IMF dreamed up for itself (and its members) way back in 1969 when the US was still bound to the Bretton Woods treaty of July 1944. This story is all news to me...and I'm sure it's the same for you. It's entitled "IMF may need to 'print money' as crisis spreads". At least there isn't a word in here about them selling any gold! The link is here.

And lastly, the weekly offering of silver analyst Ted Butler. As always, his commentary is worth reading...and this one particularly so. This week's essay is entitled "A Shock To The System" and the link is here.

I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle. - Winston Churchill

All over the world, money is being created out of thin air by the hundreds of billions of (insert your favourite currency name here) per month...just to try and save the financial system...including the banks. There will be much more forthcoming. But it's already crystal clear that it is not nearly enough. They will never be able to print enough money to stop this great death spiral of all debts...and all currencies. We are going through a world-wide financial deleveraging and a world-wide credit crunch at the same time...and there's not a damn thing that anybody (or any government) can do to stop it.

The only thing that will save the financial system is a return to the Bretton Woods of 1944...and the gold standard. And when that day comes, the new price of gold can only be guessed at. All I can say is that it will be a very large number.

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.