From Ed Steer:

Pack a lunch and blow the froth off a cool one...as I've got three days of gold and silver market activities to talk about...and lots of fascinating reading as well.

Wednesday, November 26th

This was the last day for all parties to get their gold and silver contracts switched to the 2009 year...or they would have to stand for delivery on Friday. With the U.S. in holiday mode almost from the beginning of trading, the tiny rally at the Comex open was stepped on and never recovered. But it hardly mattered...as volume was virtually non-existent. Silver was the same. Call the day a big zero. However, the shares reacted otherwise. Even though gold was down ten bucks at the close of the equity markets, the HUI still managed a surprising 6% increase...the second day in a row that gold has been flat or down...and the HUI up. Hmmm!

Open interest on Tuesday showed more Comex traders cashing in their chips instead of rolling over their positions into future months. Sure, there was probably some long liquidation from various quarters...and maybe even some fresh shorting, but I would bet that most of the open interest drop on Tuesday was spread trades being lifted. Gold o.i. dropped 6,411 contracts to an astonishingly low 276,567 contracts. Tuesday's silver o.i. was a shocker too...with o.i. down 3,540 contracts to 86,878. The last time that Comex gold o.i. was this low was back in August 2005 when the gold price was $431/oz. For silver, it was September 2004 when the price was just $6.90 the ounce.

The usual N.Y. commentator had this to say..."Tuesday’s ECB (European Central Bank) statement of condition indicated an €57Mm drop in ‘gold and gold receivables’, 2.83 tonnes at the present book value. This was attributed to a sale by one captive CB (central bank) and a ‘net sale’ of coin by another. Last week the sale was 0.5 tonnes. The ECB group continues to run far below the 9.6 tonne (weekly) average required if the WAG2 quota were to be sold evenly. On the face of matters, the ECB group is not responsible for the large amount of Central Bank-type bar reported to be around." And on the recent drops in open interest, he put forward this amazing fact..."Since Comex gold started rising on Tuesday November 19th to last night (Tuesday night), bullion has gained $82.50 (11.2%) and open interest has dropped 13,983 lots (43.49 tonnes, or 4.8%)." Wow!!! What does it mean? I don't know for sure...but I believe it's positive...and I expect we'll find out reasonably quickly if that's true or not.

It was wall-to-wall bad news again on Wednesday. Here are the headlines...(Reuters) U.S. durable goods orders weaken sharply (-6.2%) in October... (Reuters) U.S. consumer spending plunges (-1.0%) in October...(Bloomberg) U.S. Treasury CDS (Credit Default Swaps) blow out to record highs on government programs...(Reuters) Institute for Supply Management business barometer fell to 33.8 from 37.8...(Yahoo) U.S. consumer sentiment craters to a 28-year low...(Reuters) After Citi, Bank of America Next?...(Bloomberg) The FDIC said banks categorized as "problem" institutions increased 46% in 3Q/08...from 117 to 171...the highest since 1995. (It's my bet that the true number of banks in serious trouble is many, many orders of magnitude worse than that. - Ed)

Stories to read? Here's a bunch...

The Telegraph, London..."China slashes interest rates as panic spreads: The People's Bank of China cut interest rates by more than 1% as the economy crumbles and millions of jobs are predicted to (disappear before) Christmas." The link is here.

The Telegraph, London..."Is Britain Going Bankrupt?"..."The bond vigilantes are restive. There is now a palpable fear that global investors may start to shun British debt as the budget deficit rockets to 8% of GDP." The link is here.

The Telegraph, London..."Citigroup says gold could rise above $2,000 next year as world unravels"..."Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world's monetary system with liquidity, according to an internal client note from the US bank Citigroup." The link to the newspaper article is here...and the link to the actual Citigroup report itself (a 9-page pdf file) is here.

It's not often (and I can't remember the last time it happened) that you find anything that Bill Buckler writes, out in the clear. But in these extraordinary times, he does have something posted over at Bob Moriarty's site at 321gold.com. It's entitled "The Great Deflation" and it's well worth the read. The link is here.

The 2009 year will be one of titanic shocks and changes to the global order of a scale perhaps not experienced in the past five centuries. This is why we should speak of the end of the American Century and its Dollar System. - F. William Engdahl, 26 November 2008

Thursday, November 27th

With the U.S. closed for Thanksgiving, the rest of the world's gold and silver markets were barely fogging a mirror. I spoke with Ted Butler around lunch time on Thursday, and he said that up to that point in both the Far East and Europe, less than 1,000 contracts had been traded in silver...and under 10,000 in gold. And I thought that Wednesday was a zero day!

I forgot to mention that on Wednesday the GLD increased their “supposed” gold holdings to 758 tonnes, and the SLV was unchanged once again.

However, just because the U.S. was closed for Thanksgiving, that doesn't mean the news stopped rolling in. To the contrary, I have three more items that are worth your attention.

The first is another story from Ambrose Evans-Pritchard from The Telegraph in London. The first paragraph reads..."Paul Volcker, the former chairman of the US Federal Reserve, has warned that the economic slump has begun to metastasize after a shocking collapse in output over the past two months, threatening to overwhelm the incoming Obama administration as it struggles to restore confidence." The rest of the story is linked here.

The second item is from Market Watch over at The Wall Street Journal. The title of the commentary is "Gold bugs, Grinches finally agree on something: They see gold making significant progress after price bounce"...and the link is here.

One writer I particularly enjoy reading is F. William Engdahl. His latest piece is well worth your time. It's entitled 'Colossal Financial Collapse: The Truth behind the Citigroup Bank "Nationalization"'. The link is here.

Resurrecting Volcker during the most wanton monetary policy in US history in order to (fool) global investors into believing that Volcker will convince Obama and US solons to halt their debauchery at the precise time...is like Caligula enlisting Saul of Tarsus to advise him on the precise time to go celibate. - Bill King, The King Report, 27 November 2008

And lastly, just to give you some idea of how frighteningly bad the foreclosure situation is in some parts of the USA, here's a very short youtube.com clip from Detroit. I just can't imagine how much worse it will get if/when the automobile industry folds up. The link is here.

Friday, November 28th

Friday's market activity in both precious metals was another yawner. Silver got pushed around a bit, but that was all. According to the usual NY commentator, only 49,650 gold contracts were traded on Friday, which is hardly worth mentioning.

Open interest for Wednesday's trading, before the U.S. Thanksgiving holiday, amounted to the following...gold open interest down 475 contracts to 276,092...and silver o.i. fell another 698 contracts to 86,180.

Friday was first notice day for delivery into the December contract for both gold and silver. In an e-mail yesterday, Ted Butler said the following..."December gold open interest is 16,053 contracts against 8,600 deliveries this morning. December silver o.i. is 6,304 contracts against 3,040 deliveries this a.m. The remaining silver o.i. is a bit higher than I would have guessed."

When a contract is delivered into on the Comex, it causes an automatic decline in open interest...as a long contract has been extinguished by delivery of the actual metal itself. So, when Friday's open interest numbers become available on Monday morning, gold o.i. will drop 8,600 contracts...and silver, 3,040...plus or minus whatever longs, shorts or spreads were placed, covered or removed yesterday (Friday).

In gold news, I see in a Reuters story that was filed in Moscow shortly after midnight their time last night that..."The Russian Gold Industrialists Union has said it expects gold output to rise this year by 8% overall, to 176 tonnes, after five years of declines. Output from mines rose 10.2% to 136.82 tonnes in January-October 2008 from 124.15 tonnes a year ago."

I mentioned a Bloomberg story in my Wednesday commentary (above) that the US Treasury debt CDS (Credit Default Swaps) had hit a record high because of all these trillions of dollars of new government debt being piled on. Well, there were some rather blunt comments about it over at Bill Murphy's lemetropolecafe.com yesterday..."It is absolutely inconceivable that the bonds are rallying (disappearing yields) due to a ‘safe haven flow of funds’ when their risk of default is being assessed at an all-time high!!! What is wrong with this picture???...The risk premium that (the) market is assigning to U.S. Government bonds is now wider than the risk premium the market was using (to) price the highest rated Corporate bonds as recently as November 2007!!!...What this is saying is that the market is (now) assessing the probability of a U.S. Government default at a higher rate than was being assigned to the highest quality corporate debt just 12 months ago. Incredible!!!" (Words fail me! - Ed)

I was interviewed by Al Korelin of Korelin Economics yesterday. If you feel that what I might have to say would be of interest, the link to that interview is here.

Mercifully, I only have one story in this segment. It's from the folks over at mineweb.com. Like the World Gold Council, they are never one to cheerlead the precious metals at the best of times. So it's a rare event indeed when they do print something that even hints that things might get bullish. This piece is entitled "Structural deficit in gold supply could send prices higher" and the link is here.

We will bankrupt ourselves in the vain search for absolute security. - Dwight D. Eisenhower

Today's blast from the past goes back to the 1970s again. This was in the days before American television invaded Canada, so it’s amazing to see what these groups actually looked like when they were performing. This hit song from back then is no exception. Click here.

I continue to watch the global economic, financial and monetary meltdown with morbid fascination...knowing that there isn't a thing that any or all governments and central banks can do to stop it. Well...yes, actually...there is one thing...and that's the remonitization of gold. Earlier this year (and late last year) there was a smattering of stories in the main stream media about a return to some sort of gold-backed currency. In the last couple of months, that trickle has become a veritable flood. Will it happen? Don't know...but I do know what will happen if they don't. So do you.

The open interest numbers indicate that we are at the very bottom of the barrel when it comes to speculative long positions that remain in gold or silver (and every other commodity as well) and that the bullion banks have covered a huge portion of their short positions. Ted Butler has always said that we would have the "mother of all clean-outs" before the powers that be would set the gold price free. Well, what we've been through since July 15th, certainly qualifies. Now we wait and see.

Enjoy the rest of your weekend, and all of us at Casey's Daily Resource Plus will see you bright and early on Tuesday morning.

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