From Ed Steer:

There wasn't a lot of activity in Thursday's trading in gold in the Far East. However, at 3:00 a.m. New York time, there were some signs of life...but even the slightest attempt at a rally was met by equal bouts of selling. This 'up-down-up-down' activity went on for eight hours. But shortly after the London p.m. fix was in, a serious seller showed up and took both gold and silver down to their respective lows of the day. Then, at precisely 1:00 p.m., G-Dubya opened his mouth...and one of the biggest turnarounds in gold, silver...and the stock markets...took place. The prices of both metals continued higher into after-hours trading on the Globex. Once again, these rallies in gold and silver looked like short covering to me. But, regardless of the cause of the price rises, the precious metals stocks did equally as well. Volume was only so-so in both metals.

Gold open interest on Wednesday's $20+ decline in the price showed a drop of only 1,709 contracts to 292,122. Silver's 50 cent drop only coughed up 160 contracts to 94,334. This is not a lot of change for such big drops in price...so you can see that even big price declines no longer get much selling activity, as there aren't a lot of contracts to liquidate at these low prices. However, there could have been some new shorts put on. The volume on Wednesday was very light...air, really. What happened in Wednesday's action won't show up until the the COT on the 21st...next Friday.

Lots of gold news today. In a mineweb.com story I noted that South Africa's September gold production fell 17.7% year over year. As I've said before, production could fall 100% and JPMorgan would not allow it to show up in the price...and any rally based on that news would be capped immediately. The usual NY gold commentator had three points of note yesterday: 1) Investment demand...plus gold sales to India...are still extremely high. 2) Last week the European Central Bank reported that there were NO gold sales at all, and inventories actually rose a hair. 3) After twelve consecutive days, GLD has finally shown some activity...down 8,000 ounces! And lastly, I note in commentary over at Bill Murphy's lemetropolecafe.com that at the current price for gold, 90+% of all December gold options would expire out of the money. So much for a squeeze in the December delivery month. I guess the boyz at JPMorgan/HSBC can read too.

Also on gold was this item posted at arabiannews.net. I don't have the URL to validate the information, but it looks legit to me. "There has been an unprecedented surge in Saudi gold purchases in the past two weeks with over $3.5 billion being spent on the yellow metal, reported Gulf News citing local industry sources...Gold market expert Sami Al Mohna told the leading regional newspaper that this buying had substantially increased the gold reserves of the country: ‘Many Saudi investors see this as the right time for making investments in gold as the price is the most reasonable one at present’...He said gold was seen as a traditional safe haven at a time of global financial turmoil. Gulf regional stock markets have fallen very sharply since early October, leading to an exodus of cash which needs to find a safe haven."

In other news, GE's credit rating was confirmed AAA yesterday...even though they have their hand in one of TARP's pockets! Go figure! The U.S. monthly deficit for October was...are you ready?...$237 BILLION. No wonder yesterday's 30-year bond auction was a bust!

Today's first story is a 'must read'...and I mean it! I've been talking about this issue for over a year now, as more and more stories keep surfacing (like the one I posted in my rant yesterday) about a return to some new monetary system backed by gold...a return to the first Bretton Woods agreement. This article by Larry Edelson over at moneyandmarkets.com sums up my opinion exactly. It's entitled "The G-20's Secret Debt Solution". None of the gold price numbers he mentions shock me in the slightest...as I've seen similar figures over the years. I thank Paul Bowman for sending this article to me...and the link is here.

The second story is from The Standard in Hong Kong which was filed yesterday evening in North America...but first thing Friday morning in Hong Kong. Here's the first paragraph..."The mainland is seriously considering a plan to diversify more of its massive foreign exchange reserves into gold, a person familiar with the situation told The Standard." Needless to say I think the story, entitled "Gold Rush", is worth reading. The link is
here.

click to enlarge

Government's view of the economy cold be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. - Ronald Reagan (1986)

Will there be a surprise new monetary order coming out of the G-20 this weekend? That's what should happen, but I don't know for sure, as I'm not a prophet. I had dinner with James Turk et al last night, and he thinks it's all smoke and mirrors. Our group was evenly split on it. I know that printing more money is not the answer...and sooner rather than later...everything is either going to blow up or melt down. Will the voice or reason rule...or will insanity win the day? We'll find out soon enough.

Today's 'action' in everything will be fascinating to watch, and all of us at Casey's Daily Resource Plus will be here on Saturday morning to discuss it...and we'll see you then.

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