From Ed Steer:


On New Years eve day, gold got sold off in the Far East a bit...and then the down trend accelerated through London trading, with the bottom being the London p.m. gold fix. From there...and to everyone's surprise...the price took off to the upside with some real authority. True, there hadn't been a lot of volume up until that point, but that changed from the London p.m. fix until the close of trading in New York. Silver's chart was very similar, with the metal turning in an outstanding day as well. Gold put in an "outside day key reversal to the upside"...which is a very bullish technical indicator. The boyz have never...ever...allowed this technical indicator to work in gold...and have taken gold down the very next day to negate it.

The world's gold market's were closed on January 1st, but once early morning trading began on January 2nd in the Far East, the price spike in gold was killed immediately...and it became obvious that someone (JPMorgan, perhaps?) didn't want gold to rise and confirm that bullish technical indicator I just spoke of, so it was taken down with some authority...as was silver. This lasted until about 1:00 p.m. in Hong Kong, when both metals began to recover somewhat...but the selling pressure showed up again as soon as London opened, and continued that way, with both metals on the defensive when New York opened. Gold was not allowed in positive territory for the rest of the N.Y. trading session, but silver was allowed to tack on about 40 cents. Both metals would have done better yesterday, but it was obvious that someone didn't want runaway prices to the upside during London or New York...which is what would have happened if the moonshot open in gold that began in early Tuesday morning Globex trading had been allowed to run its natural course.

In Tuesday's trading, gold open interest rose another 2,142 contracts to 300,448...with silver open interest actually declining 441 contracts to 85,312 contracts. New Year's eve's (Wednesday) open interest changes on the big spike showed an open interest increase in gold of a largish 6,203 contracts to 306,651. Silver o.i. rose 611 contracts to 85,923 contracts. It will be of great interest to see what Friday's open interest figures are like once they become available on Monday morning.

The other item of interest on Monday will be the latest Commitment of Traders report. It will be interesting to see what the CFTC uses for a cut-off date. But regardless of which day they pick...neither Wednesday's nor Friday's dramatic action in gold and silver will be in that one. We'll have to wait four more days until next Friday to see who went long and who sold short these last couple of trading days.

In gold news, the usual N.Y. commentator was not pleased (nor was I) about Indian imports of gold for December and all of 2008..."Yesterday the Bombay Bullion Association announced that India's December bullion imports dropped 81% from last year to 3 tonnes...and that the full year's imports were only 402 tonnes, down 47% from 2007's 759 tonnes." Equally disappointing was Turkish demand in December...a miniscule 227 kilos. His closing comment was the following..."The rally appears to be fuelled entirely by Western speculative sentiment, which can be very powerful. But with such a weak base in physical demand, it is likely to be short lived." We'll see. And lastly, I see that the GLD ETF added another 150,000 ounces on December 29th to a new record high total of 780 tonnes...if you believe that they actually have all the gold they say they do, that is. Oops...one more thing..."Apex Silver Mines Limited has received a delisting notice from the NYSE." If you're wondering why...just take a look at their hedge book...and the current zinc price.

In other news: an aljazeera.net story where the headline read..."Russia cuts gas supply to Ukraine"..."Russia's state gas monopoly Gazprom has cut all gas supplies to Ukraine after talks over payments owing and 2009 prices failed." In a Bloomberg story, a sure sign that there's big trouble in the municipal bond market is the fact that Pimco is postponing dividend payment on a pair of closed-end municipal bond funds. (Here's another case where investors should be more concerned about a return of their investment, rather than a return on their investment. - Ed) In a cnn.com story I see that five Democratic governors have asked Uncle Sam for a cool $1 Trillion in aid to the country's 50 states for various and sundry things. And from The King Report..."2008 will be a year of historic imfamy. The S&P 500 declined 38.5%, the biggest drop since 1937. The Dow Jones Industrial Average declined 34%, the largest drop since 1931. It's highly unlikely that 2009 will be as ugly. But this does not suggest that it will be a ‘good’ year. "

Today's first story is about the man behind the printing presses in Zimbabwe. If you read his bio, he's obviously not the sharpest knife in the drawer. But what the story does show, is how tyranny can keep a country in fear. The story from the L.A. Times is entitled "Zimbabwe's Money Man Plans to Keep on Printing"...and the link is here.

The next story is from forbes.com. It's columnist Dan Gerstein's last offering of the year, and he lets it all hang out. It's entitled "Dangerous Thoughts: The Most Distrusted Institution in America". The link is here.

In the next story, British savers are about to find themselves in the same boat as their American counterparts...0% interest on their accounts. The story is from telegraph.co.uk in London where the headline reads "Savers facing accounts with no interest"...and the link is here.

Lastly is the latest from James Turk over at goldmoney.com. His commentaries are always happy reading...and this one is no different...as he discusses the enviable record that the US$ gold price has racked up. The story is entitled "Gold Climbs Again - Eight Years in a Row" and the link is here.

I need to confess that I have no idea where the S&P500 will be in a year's time. But given the catastrophic economic conditions we find ourselves in, I'm convinced that governments around the world will increase the intensity with which they will be attempt to save the world with monetary and fiscal measures. As pointed out in last month's report, this will increase volatility and should be 'gold friendly'. - Marc Faber

Today's 'blast from the past' is from the 1970s. I hadn't heard this song in ages until I dug it up on the Internet about two weeks ago. It's got a great driving beat...and I hope you enjoy it...so turn up your speakers and then click here.

Despite the big day on the US equity markets yesterday, nothing has fundamentally changed. How long this 'rally' lasts remains to be seen. But when the economic, financial or monetary systems cough up their next hairball, we're going to see another nasty turn to the downside...and gold will be the only show in town...just like it's been for the last eight years in a row.

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