From Ed Steer:

On Tuesday, both gold and silver started to decline at one of their usual times...about 3:00 a.m. New York time on Tuesday morning...with the bottom coming at the close of London trading. The price managed to recover somewhat after that...but once again (at 3:00 a.m. New York time on Wednesday morning) gold and silver prices began to decline. There was a temporary bottom at the London close again yesterday, but the recovery was short-lived, and both metals were taken down right into the close of after-hours trading on the Globex.

Monday's activity showed another decline in gold open interest...down 2,312 contracts. Tuesday's sell-off brought another o.i. decline in gold of 906 contracts. Without doubt, yesterday's activity will show a further decline when the data becomes available later this morning.

In silver, Monday showed a decline of 1,600 contracts and Tuesday's o.i. was up (surprisingly) by 730 contracts. I would suspect that Wednesday's activity will show a further decline in open interest.

Volume on Tuesday and Wednesday was very light, once you take the spreads and switches out. It's very easy for the market price to be influenced in either direction...and right now, the influence is down. It's difficult to say how much further this can continue, as there are damn few tech funds left to flush out...especially since we aren't seeing the 50-day moving average broken to the upside...or new low prices. Either of these occurrences would bring either more buying or more selling...depending on the direction of the move.

Without question, the short position of the Commercial traders is now the lowest it’s been in at least three years...especially in gold. There's a limit to how low they can go, because the moment that nobody wants to cough up their long positions (regardless of the price) the bottom is in. But as a matter of note, two US bullion banks are short 51% of the entire Commercial net short position in gold, and 81% of the entire net Commercial short position in silver. (I thank Gene Arensberg for that info.) I believe that the two banks in question are JPMorgan and HSBC USA. Ted Butler thinks that it's only JPMorgan that's left... and I'm not about to disagree with that

As I've said before on this issue...when you're the tallest hog at the trough...there's not a lot that you can't get away with when the Comex and Nymex do nothing to enforce the rules against their obscene and grotesque concentrated positions.

I'll sum up the last couple of business days in the markets by saying that we are on the verge of complete collapse in the equity and financial markets. What you see out there is a total financial, economic and monetary hallucination which, despite the best efforts of banks and governments, is imploding faster than they can pump it up.

I see in a Financial Times story out of London yesterday that John Thain, CEO of Merrill Lynch, warned that "the global economy is entering a slowdown of epic proportions, comparable to the Great Depression". (Note to John: This is old news, but I'm glad to see that even you can finally see it. - Ed) I note in another Financial Times story that the Russian Central Bank has signalled its intentions to allow a significant devaluation of the rouble...even though they just raised their interest rates to 12%. I see that American Express is seeking approval to become a bank so it can get its share of the TARP money. Will Visa and MasterCard be far behind? And lastly, Goldman Sachs lost another 10% of its 'value' yesterday. Talking about GS, I note in a story out of the L.A. Times that GS "urged some of its big clients to place investment bets against California bonds this year despite having collected millions of dollars in fees to help the state sell some of those same bonds." Does this sort of behavior out of GS surprise me? Not in the slightest.

I have two stories today...the first is about ex-Goldman Sachs’ boss, Hank Paulson, and his continuing efforts to save AIG. It's a Wall Street Journal story that wasn't available on the Internet and is posted here as a GATA dispatch and entitled "New AIG Rescue is Blessing for Banks"...and that it is. The link is here.

My second offering is yet another commentary on a return to the gold standard. This story appeared in the Washington Times the other day. The author, Lawrence Hunter, is former staff director of the congressional Join Economic Committee and currently president of the Social Security Institute. The story is entitled "Obama's Golden Opportunity" and the link is here.

I never expect anything good from government. And here I refer to the institution itself. How can you, considering that its main products are wars, pogroms, prosecutions, persecutions, taxation, regulation, inflation, and assorted idiocy. These aren't just accidental characteristics; the actual essence of government is coercion, and coercion is not a good thing. Worse, the people drawn to 'service' of the State aren't the ‘best and brightest’, as their propagandists put out, but the worst and dullest; they're people who believe in organized coercion. Who else could even consider working for such an organization? That's why ‘throwing the bums out’ is a pointless exercise in self-delusion. - Doug Casey, caseyresearch.com

When I look at the future, whether it be next week, next month...or next year...I see nothing but the smouldering ruins of what used to be a world economy and its associated financial and monetary systems. Nothing of what currently exists, will remain...and the "Greater Depression" will be upon us.

And on that cheery note...I'll see you on Friday.

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