From Ed Steer:

As expected, the Thursday morning rally at the Sydney open got snuffed out in short order. Gold remained flat in Hong Kong until 4:00 p.m. in their afternoon ...3:00 a.m. in New York. Then the boyz showed up, and down gold went until the London open, a short rally got turned over, and the bottom for the gold price came at the London a.m. fix. From there it rallied gently until the London p.m. fix...and then away it went to the upside.

Silver was the same, except it didn't wait around for the London p.m. fix before it headed up. Its rally began promptly with the Comex open in New York. Both metals remained strong even in electronic trading after the Comex closed...and despite the strength of the US$.

Gold open interest dropped another sizeable chunk on Wednesday...down 8,387 contracts to 345,804. In silver, o.i. went the other way for the second day in a row...up 700 contracts to 89,885. Go figure! The goings-on in silver have been really different lately...falling when they should be rising...and vice versa. It's all very strange. The Commitment of Traders will be out at 1:30 p.m. Eastern today. I expect to see massive deterioration in both metals.

Yesterday we put in a technical pattern known as a 'key reversal to the upside'. In the nine years I've had my faced pressed against the glass studying the gold and silver market price action, I can tell you without fear of a lie, that an upside key reversal such as this, has never been allowed to be confirmed by a big up-move the next day...ever! The bullion banks have always crushed this indicator whenever it manifests itself. Let's see how they make out this time. As I write this, I see that they stepped on the metals as soon as gold trading began in the Far East on Friday morning. Don't forget that 90+% of all gold and silver volume occurs during Comex trading...so, in Far East trading, it's easy for the bullion banks to affect prices there by entering the Globex system where trading is much lighter.

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In other gold news yesterday, I see in a story at marketwatch.com that Mark Hulbert feels that, based on 25 years of data, there is a 95% chance that "gold's short-term trend likely will be down...This does not mean gold can't go higher from here. But it does suggest that the odds are against it doing so. Lest I incur undeserved gold-bug wrath by writing that, let me hasten to add that this bearish conclusion applies to just the next several weeks." Mumbai (Reuters) – “India's gold imports plunged more than 90 percent to just 1.2 tonnes in January 2009, from 18 tonnes at the same month last year, due to high prices and ample stocks, the Bombay Bullion Association said on Thursday.” Davos, Switzerland (Reuters)..."Gold is likely to hit new record highs, spurred by serious concern about the U.S. currency and doubt about the state of the world economy, the chairman of Barrick Gold Corp. said Thursday." Well, the 500 silver contracts I spoke of yesterday were actually delivered yesterday. JPMorgan was the issuer (502 contracts)...with Bank of Nova Scotia being the main stopper (461 contracts). And lastly, GLD was up 350,000 ounces yesterday to another new record...843 tonnes (27.1 million ounces). SLV was unchanged.

In 'other news'...cnbc.com..."The cost of restoring confidence in U.S. financial firms may reach $4 Trillion if President Barack Obama moves ahead with a ‘bad bank’ that buys up souring assets." Bloomberg... "This may sound a bit ridiculous, but we think we have begun a full-blown bear market in fixed income," wrote Tom Fitzpatrick of Citigroup. thehill.com..."Senate Republicans are highlighting a proposal to subsidize 4 percent mortgages as part of the economic stimulus plan to focus the package on the housing crisis." newyorkfed.org..."the New York Fed purchased $16.8 billion in agency mortgage-backed securites." [More debt monitization! – Ed] telegraph.co.uk..."Britain's Chancellor of the Exchequer, Alistair Darling, has pulled out of the World Economic Forum in Davos, within hours of being warned that the UK faces a worse recession than any other major country in the world." forextv.com..."Bank of Japan (BOJ) monetary policy committee members called the Japanese economy's deterioration an ‘emergency’ at their Dec. 18-19 meeting. The central bank was responding to record plunges seen in exports and industrial production." guardian.co.uk..."Germany looks at new bank rescue plan"..."German banks are estimated to have between $300 billion (£285 bn) and $1 trillion of these [bad] assets sitting on their books, adding to the pressure on Berlin to act." And lastly...bbc.co.uk..."ZIMBABWE ABANDONS ITS CURRENCY"..."Zimbabweans will be allowed to conduct business in other currencies, alongside the Zimbabwe dollar, in an effort to stem the country's runaway inflation"...so spoke Patick Chinamasa...acting Finance Minister. Oops...here's another one...dailymail.co.uk..."Record number of fake £1 coins in circulation"...Random sampling tests carried out by the Mint last May found that 2.58% of £1 coins were counterfeit. The total amount of fake £1 coins has hit 37.5million...the highest sum since the coin was introduced in 1983...and a rise of 26 per cent since 2007."

In a special paragraph about the U.S. real estate market, I note in a marketwatch.com story that new home sales fell 14.7% in December to a record low of 331,000...the lowest since records were kept in 1963. It's hard to believe that the real estate market is about to get worse...but it is. Have you ever heard of an 'option ARM' mortgage? $750 billion were issued between 2004 and 2007. As of December, 28% of these mortgages were delinquent or in foreclosure. I expect a huge portion of these to be foreclosed on...and the process has barely started. To give you an idea how bad things really are in places like California, here's a video that will make your eyes water. It's depressing to watch...and I thank my dad for sending it to me! The video is entitled "Foreclosure Alley" and the link is here.

Today's first story is from the Financial Times in London. The story is filed from Davos and Moscow and is headlined "Wen and Putin lecture western leaders"..."The leaders of China and Russia on Wednesday turned the tables on their western counterparts who have dictated the world’s economic agenda, lecturing them for policy failures they said had led to the global financial crisis." The link is here.

Next is another story from the Financial Times in London. The thin edge of the wedge showed up in Bermuda yesterday. Osmium Capital Management, a $178m hedge fund manager based in Bermuda, is launching a new share class allowing investors to hold shares measured as troy ounces of the fund, rather than US dollars, sterling or euros. I thank reader Dr. Scott Diering for sending it along. The headline reads "Hedge funds offer to price in gold" and the link is here.

And lastly, in a story I referred to earlier in my rant, I mentioned that Barrick Chairman, Peter Munk, was expecting much higher gold prices. He was also speculating on the possibility that China will dump dollars for gold. He also mentioned that "It would be dumb to hedge, considering the current climate." Well, Peter, how about hedging 24 million ounces at a price just over $300 at the very bottom of the gold market way back when? Was that a brilliant idea? However, Barrick was in the service of the Gold Cartel at the time. Their attempt to cloak themselves in the rags of 'sovereign immunity' because of that...failed miserably. Peter, please explain to your shareholders about your 'mark to market' loses. How much has it cost you to date? How about in the future...as the gold price climbs to the sky? Just asking. The Reuters story is linked here.

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Nevertheless, gold must still contend with the gold cartel and its on-going efforts to cap the gold price. It may try to 'circle the wagons' above $900, which would seem a logical point for them to make another stand now that $850 has been exceeded. If the gold cartel is successful in stopping gold for any length of time, new longs may get discouraged by the lack of progress and take profits. That selling, along with new shorts by the gold cartel, could begin a cycle of selling that gains momentum and drives gold back to its last level of support, which is $850. It would be vintage gold cartel action to stuff the gold rally in this way. - James Turk, Freemarket Gold and Money Report, 26 January 2009

It's an important day for both gold and silver. The fight is on. Who will win? Don't know. Maybe it will be a draw. But as I file this rant with my editor in the wee hours of Friday morning, I know that the outcome will have been decided while I'm sound asleep...and long before I turn my computer on later this morning.

Have a great weekend...and I'll see you on Saturday.

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