From Ed Steer:


As per usual lately, there was little action in gold in Far East trading on Friday. The 'top'...such as it was...was at the London a.m. fix. From there, it was downhill all the way...with the real damage coming on the Comex open...again, as per usual. The bottom was in shortly after the London close. From there, a respectable rally cut the losses on the day to only eleven bucks. The silver chart was similar, but this precious metal made it all the way back to virtually unchanged from its inter-day low yesterday. However, the HUI managed to finish slightly positive on the day.

Gold open interest on Thursday fell another 891 contracts to 263,295. Silver o.i. actually rose 794 contracts to 83,297.

The Commitment of Traders report was a huge surprise...and not what I was expecting at all. After the monster price drops on Monday and all the other declines in open interest we had in both gold and silver for the reporting period (26 Nov-02 Dec), I was expecting a huge improvement for the bullion banks once again, but it didn't happen. The opposite actually occurred. Bloomberg had a story yesterday with the headline that read "Gold Heads for Biggest Weekly Loss Since 1983 on Dollar’s Gain" Dec. 5 (Bloomberg) – “Gold fell, heading for the biggest weekly loss since 1983, as the dollar climbed, eroding the appeal of the precious metal as an alternative investment. Silver also declined.” So...what happened...you ask? Well, for the reporting week, silver open interest did decline...down 4,444 contracts to be exact, and gold o.i. fell 11,771. What's hard to explain is that the internal structure of the Non-Commercial and Commercial categories changed in ways that are so counterintuitive to the price action that it strains believability. Even Ted Butler was struggling to rationalize the whole thing...and we had a very interesting and animated conversation about it. Let me put it this way...the price action from the previous week indicated that the tech funds in the Non-Commercial category should have sold longs and gone shorter...and the bullion banks should have covered shorts and gone longer. What actually happened was that the tech funds sold longs and covered shorts, while the bullion banks covered shorts and sold longs! Go figure. The latest COT is linked here...and if you can make any sense out of it, I'd love to hear from you.

In the bad news department yesterday came the following stories...(Bloomberg) "Mortgage delinquencies, foreclosures rise to record as one in 10 American homeowners fell behind on mortgage payments or were in foreclosure during the third quarter." Now Britain is considering direct cash infusions into their economy...money out of thin air. This is one day after the president of the ECB, Jean-Claude Trichet, said the same thing. The headline from The Telegraph read "Bank of England mulls 'nuclear option' of cash injection." Then this Bloomberg article from California..."California, the world's eighth largest economy, may pay vendors with IOUs for only the second time since the Great Depression," State Finance Director Mike Genest said. (Note to Mike: how do you deposit IOUs in your bank account...and what will the cashiers at Costco have to say when you present one? Just asking. - Ed) And lest I forget...those 533,000 job losses...the worst since 1974.

Three stories again today. The first is from Julian Philips, editor of the Gold Forecaster. Phillips concludes that gold sales are running far below authorized levels and that there is little likelihood of additional sales of any size. Phillips adds that even if the International Monetary Fund should sell any of the gold it long has been threatening to sell, an Asian central bank well might buy all IMF gold offered for sale, diverting the gold from the market. You can find Phillips' analysis, headlined "Will Central Banks Sell Out or Are They Sold Out?"...and linked here.

The second story is from John Crudele over at the New York Post. He comments that "Washington intervening in the stock market is the biggest financial story of our generation." The story, entitled "It's Time to End Monthly Employment Report Fraud", is linked here.

The last story is a bit of a read. This is the second story from Vanity Fair that I've highlighted in the last month. I've been very impressed by the quality of writing and research that goes into their articles...this one included. This is a "Riches to Rags" story...as Wall Street and the hedge fund industry implode. It's entitled "Wall Street: Profiles in Panic" and is well worth reading. The link is here.

I haven't sold any commodities since the bull market began...I own some gold and if gold goes down, I’ll buy some more...and if gold goes up, I’ll buy some more...gold during the course of (this) bull market, which has several more years to go, will go much higher. - Jimmy Rogers, Bloomberg, December 5, 2008

Today's 'blast from the past' comes from the late 1960s. If you know the words, feel free to sing along, as it truly is an "oldie but goodie". Turn up your speakers and click here.

As I said yesterday about the jobs report...keep an eye on the Dow, the US$...and the gold price when they release the news. Well, it was exactly according to the PPT script: Dow...up, US$...up, Gold...down.

This is beyond The Matrix.

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