From Ed Steer:

Gold was under slight pressure right from the open in Sydney on Monday morning. Gold was down $10 about half an hour before the Comex opened. Then the bullion banks pulled their bids and the tech funds found themselves with margin calls...and their contracts got sold into a vacuum of no buyers...so the price plunged. Same old routine. Every rally attempt after that was crushed. Gold never had a chance. Ditto for silver. Both metals closed slightly above their lows of the Comex session. Yep, the US$ was up...but it had nothing to do with the pounding that the precious metals (and their shares) got. This was a criminal act, pure and simple.

click to enlarge

Friday's open interest in gold (after the big price spikes...that were subsequently crushed) rose 5,463 contract to 333,666. Clearly some serious opposition was present. Silver o.i. rose 1,118 contracts to 87,320. Cut off for this Friday's Commitment of Traders report is today at the close of trading at 5:15 Eastern time. Will this data...plus yesterday's and today's...be in it? It should be, but who the hell knows these days.

The usual New York commentator had this to say about yesterday's activity..."Gold drifted down steadily to the NY open, when it was hit with an avalanche of selling. Huge estimated volume of 86,098 lots traded by 9 a.m., slicing almost $20 off the price, all rally attempts were smashed, and Comex gold closed down $34 on estimated volume of 149,686 lots (switch effect 18,260). Monday morning Comex bashings seem to have become a habit."

Not much in the way of gold or silver news yesterday. The big item was the story about Apex Silver being in the preliminary stages of going Chapter 11. As I've said before, this should be no surprise to anyone if they have the slightest hint of what their hedgebook is like. And I also note in a story in Canada's National Post that NovaGold received notice today that it might be delisted. And in a story in The Wall Street Journal yesterday, the headline read "A Wave of Buying Hits Commodity Funds...In recent weeks, commodity funds have seen an influx of several billion dollars, a stark reversal from the brutal forced selling that dominated the second half of last year. Most of the money has flowed into long-only vehicles -- funds that bet on prices to rise -- suggesting a combination of investors' revived confidence and portfolio rebalancing."

With the weekend now behind us, there's lots of "other news"...and here are the 'lowlights'. The Telegraph (London)..."Bond bubble is accident waiting to happen. The bond vigilantes slumber. As the greatest sovereign bond bubble of all time rolls into 2009, investors are clinging to an implausible assumption that China and Japan will provide enough capital to keep the happy game going forever." Marketwatch.com...“Alcoa racks up $1.2 billion loss in their last quarter.” Bloomberg (Moscow)... “Russia's ruble slid to its weakest level in almost six years against the dollar after the central bank devalued the currency for a second day as declining oil prices threaten to deepen the country’s economic crisis.” The Telegraph (London)..."The Bank of England will be able to print extra money without having to legally declare it. The government is set to throw out the 165-year-old law that obliges the Bank to publish a weekly account of its balance sheet -- a move that will allow it theoretically to embark covertly on so-called quantitative easing. This will heighten fears that the Government will secretly pump extra cash into the economy.” ["heighten fears"??? This change is an absolute guarantee that the government will do exactly that! – Ed] And lastly, The Telegraph (London): The headline reads "Europe's economy contracts at rates not seen since1930s"..."German exports and industrial orders have both plunged at the steepest rate since modern records began and Spain's unemployment has surged above three million, capping one of the most disastrous days for Europe's economy since the Second World War."

The first story is silver analyst Ted Butler's latest weekly commentary. Butler reports that the Commitment of Traders for gold and silver on the commodities exchange has turned in favor of the manipulative shorts. The essay is entitled "Gold COT Deterioration" and the link is here.

Today's second story is from The Economist. "The central bankers of the Great Depression were obsessed with a single idea, rather like their successors today." The title of the article is "Lords of Finance" and the link is here.

And lastly, about eight years ago, I read a book entitled The Creature From Jekyll Island: A Second Look at the Federal Reserve by G. Edward Griffin. I was greatly distressed by what I read. Griffen spent a lot of time talking about an organization called the Trilateral Commission. The following story landed in my inbox on the weekend and I thought it worth sharing. It's entitled "The Return of the Trilateral Undead" and the link is here.

Investigating Goldman Sachs' shorting its own mortgage-backed securities when Henry Paulson was CEO would be a good start in cleaning up the mess and restoring confidence. Prosecuting JPMorgan Chase's involvement in sucker-punching gold prices last August would be another step toward restoring confidence. - Curtis Hesler, Forbes.com, 12 January 2009

click to enlarge

So, are gold and silver going to get hammered from here? Well, the bullion banks (mostly JPMorgan) are sitting on a pile of short positions they've accumulated from all the tech funds and small traders that have gone long over the last month or so. If they figure they have all the mice they can get in the trap at this time, they can pull the lever whenever they want. Yesterday could have been the start. How far down we go will depend on Paulson and Bernanke...as the laws of supply and demand no longer apply in these markets.

See you on Wednesday.

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