From Ed Steer:


The Kitco gold chart for the last three days is a sight to behold. I've never seen such price activity. Silver too.

Gold got smacked as soon as the Globex opened for trading in the Far East on Thursday morning...but came roaring back within an hour...only to be hit again in late afternoon trading in Hong Kong, and shortly before London's morning open. This particular hit corresponded almost to the minute with a similar hit two days earlier on the January 6th. Just compare the green line with the blue line on the Kitco graph below. This corresponds to about 3:00 a.m. in New York...which is a favourite time of day for the boyz to make a move (either up or down) when trading in both gold and silver is razor thin. And please don't forget that 90+% of all trading volume in either gold or silver occurs while the Comex is open in New York. You never see this kind of precious metals price action in any other market around the world.

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Gold stayed down around $840 until the Comex opened, then popped up for a $20 gain in about an hour of trading time. Then the usual not-for-profit seller put an end to the merriment. Estimated volume in gold yesterday was 125,267 contracts, with a switch effect of 11,620. Silver followed a similar path...with the turning points at precisely the same times as gold. For a so-called "industrial metal", it sure does follow the gold price pattern in lock step, doesn't it?

As far as Wednesday's open interest changes, the almost $30 drop in gold price should have been accompanied by a sharp drop in open interest. Once again, that didn't happen. Open interest rose instead...this time by 7,893 contracts to 328,284. Was it spread trades...new shorting...new buying??? Don't know. What I do know is that this info won't be in the Commitment of Traders report until Friday, January 16th. Silver open interest actually dropped, which was what it should have done...but only 304 contracts to 86,484. I haven't a clue as to what's happening behind the scenes.

The usual N.Y. commentator had the following words of wisdom under his headline of "Here There be Elephants"..."Comex gold’s $24.30 loss on Wednesday did not, in fact, stem from Index rebalancing or long liquidation as (for instance) Scotia Mocatta asserted. Open interest went up, not down, leaping another 7,893 contracts (24.55 tonnes). There must surely have been some longs washed out, but evidently a very strong buyer came forward, and a lot of fresh selling had to be mobilized to contain him... As of Wednesday night, Comex gold had risen $4.10 from the recent December 19th $837 low (0.5%) while open interest has surged 37,552 contracts (12.9% or 116.8 tonnes) – 43% of that in the last two trading days....The large buyer thesis looked vindicated Thursday. After the Japanese close around $848 world gold was pushed back down into the $842 area, where it stayed until a storm of buying, unleashed at 8:30 a.m. NY time, ran gold up almost $25 in just over half an hour. Estimated volume was a huge 59,496 at 9 a.m. Almost as impressive, half of this gain was held through the day, with gold almost immediately performing a right-angle turn and trading at approximately it's up $12.80 floor close level for the next four hours. [Like I said yesterday, I'd love to know who this 'mystery buyer' is. – Ed] "

In other gold news, I see that Central Gold Trust has proposed an offering which closes at 8:00 a.m. this morning. The proposal is being underwritten by CIBC World Markets Inc. "The entire amount of US$250,000,000 provided for in the base shelf prospectus is available for this offering." so the press release states. It will be of interest to see what portion is taken...and we'll find out this morning shortly after 8:00 a.m. Eastern. And in a story at thehindubusinessline.com, I see that GFMS has altered India's 2008 gold import numbers substantially. Just a week ago it was reported to be only 420 tonnes. This story revises it to 720 tonnes! This is only a small difference...like 15% of 2008 world mine production!!! I have the story on that (and another big story on gold) linked further down.

In other news, I see in a story out of The Telegraph in London that the Bank of England has lowered its benchmark interest rate to the lowest since the central bank was founded in 1694. The headline reads "Bank of England says Interest Rate Cuts Won't Be Enough". This means that the printing presses are about to be turned on. The same problem just popped up in Germany. The headline in the Financial Times read "German bond sale's fate signals trouble ahead"..."A German sovereign bond auction failed on Wednesday as investors shunned one of the most liquid and safe assets in the world in a warning for governments seeking to raise record amounts of debt to stimulate slowing economies." Germany will soon have to print money as well...and they have some ugly past experiences with this. In a Reuters story "Corporate America faces big pension shortfalls, as stock losses leave pension funds underfunded by $409 billion." And lastly, in a story in The New York Times of all places, is this..."Bailouts Gone Wild! Porn Chiefs Seek $5 Billion"..."Larry Flynt, the publisher of Hustler magazine, and Joe Francis, the producer of the ‘Girls Gone Wild’ videos, said Wednesday that they were asking Congress for $5 billion in federal assistance, asserting that the adult entertainment industry was among those hit by the recession...MSNBC’s ‘Countdown With Keith Olberman’ devoted its final segment to it." [Such a request is highly likely to be a publicity stunt, but it shows the whole absurdity of the rescue programs. – Ed]

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Today's first story is one I mentioned two paragraphs ago. It's the story out of Mumbai in India as reported by thehindubusinessline.com about the huge revision in India's gold imports for 2008. The headline reads "2008 imports put at 720 tonnes". The link is here.

The second story is a video from cnbc.com...probably from their Far East bureau...or maybe London. It certainly wasn't done out of CNBS in New York. It's an interview about the safe haven status of gold with Jurg Kiener, CEO of Swiss Asia Capital in Singapore. I thank Brad Robertson for sending me this story..and the link is here.

And lastly, another big gold story...this one from Ambrose Evans-Pritchard out of The Telegraph in London. The headline reads "Merrill Lynch says rich turning to gold bars for safety" and the link is here.

...President Bush's response was to meet some small business owners in San Antonio last week. The small business owners are General Motors, General Electric and Century 21. - Jay Leno

Today the jobs numbers come out. The numbers are expected to be horrific. The last jobs report brought a major thumping to the gold price as soon as it was released. Will the Fed get JPMorgan to "kill the messenger" again this time? We'll find out soon enough. Regardless of what happens...my message remains the same...buy and take delivery of as much physical gold and silver as you can.

See you on Saturday. Have a great weekend.

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