From Ed Steer:

Gold got smacked just a bit harder than normal when trading began in the Far East on Friday morning, but had gained all that back by 3:00 a.m. New York time...then promptly lost in all in the next hour. However, shortly after London opened it appeared that a sustainable rally was underway. But the moment the traders on the Comex started their day, gold got hit for about $13 and never recovered after that.

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For silver, it was a different story. Although it, too, was hit at the beginning of Globex trading on Friday morning...it began to rally just before lunch in London...and with the odd pause, continued its winning ways right until the end of Comex trading in New York.

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Of all the precious metals, only gold showed a loss on the day. Silver finished up 1.78%, platinum was up 2.77%...and the star was palladium, up a whopping 5.50%. Despite gold's poor performance, the stocks finished in the positive column again yesterday, with the HUI up 2.12%

Open interest changes for Thursday's trading in gold and silver are as follows. Gold o.i. rose another 2,462 contracts to 348,899. Whereas silver o.i. fell 240 contracts to 93,699. There were no changes in either the GLD or SLV yesterday...and I thank Gene Arensberg for kindly providing the two graphs for this report.

And now for this week's Commitment of Traders report for positions held at the close of trading on February 3rd. Once again, this will be the Reader's Digest version of the stats. In silver, there weren't a lot of changes. The tech funds in the Non-Commercial category increased their net long position by 1,457 contracts...and the bullion bank(s) in the Commercial category increased their net short position by 978 contracts. In gold, there was more deterioration, which was no surprise. The tech funds in the Non-Commercial category continued to pile in on the long side, increasing their net long position by a substantial 14,192 contracts, while the bullion bank(s) in the Commercial category went net short an even more substantial 19,213 contracts. The link to this week's COT report is here.

In a nutshell...it's the same old, same old routine as we've seen for the last decade or so. The '4 or less' traders in the Commercial category [U.S.bullion banks] continue to take the short side of virtually every long trade. They do it because there are no willing free-market participants that are stupid enough to take the short side of the trade at these prices for either gold or silver. If the bullion banks weren't there to take the other side of the trade, the prices for both metals would already be at the outer edges of the known universe...which is exactly what the U.S. government, the Fed and the U.S. bullion banks don't want to happen...as their precious US$ would disappear in the blink of an eye.

Well, you say, how am I so sure it's the U.S. bullion banks that are involved. A couple of things. The first is called the monthly Bank Participation Report [BPR] which, coincidentally, was also issued yesterday...and also for positions held at the end of trading on February 3rd...the same as the latest COT. Both are snapshots of positions held at the exact same point in time...the close of business on Tuesday. So let's see what it says about what the U.S. bullion banks are up to. Firstly, silver...where it reports that two [or less] U.S. banks are short 27,189 contracts. The two [or less] U.S. banks have zero long positions. [As a comparison, there are thirteen non U.S. banks that are long 8,416 contracts and short 1,871 contracts.] Now...in the Commitment of Traders report yesterday, the silver net short position in the Commercial category was reported to be 33,173 contracts. So, by straight division, two [or less] U.S. bullion banks are short 82% of the net silver short position in the Commercial category on the Comex!!! Any questions?

Now in gold, the Bank Participation Report [BPR] says that three [or less] U.S. bullion banks are short 111,190 contracts (a record high by a long shot!). They are long 3,629 contracts...so net, they are short 107,561 contracts. [As a comparison in gold, there are twenty-three non U.S. banks that are long 33,434 contracts and short 42,335 contracts.] In Friday's Commitment of Traders, the gold net short position in the Commercial category was reported to be 177,589 contracts. So, once again by straight division, three [or less] U.S. bullion banks are short 60% of the net gold short position in the Commercial category on the Comex. And if you remove all spreads in both metals, these short positions by these U.S. banks go from obscene to grotesque! Yet the CFTC says they're still studying the issue. The link to the Bank Participation report is here...and you'll have to scroll down a bit.

Two paragraphs ago, I said that there were a couple of things that proved it was U.S. banks that were responsible for these huge concentration numbers. Here's the last thing. I've mentioned it before, but I'll bring it up again...so it can put into the context of both the COT and BPR I've already spoken of...the 'final nail in the coffin' so to speak. Two weeks ago, the third quarter derivatives report was issued by the Office of the Comptroller of the Currency [OCC]. I don't have the report at hand, so my numbers may be off a bit, but they're close enough for the purposes I need them for. In the precious metals report, it showed that 97% of all these precious metals derivatives were held by the following U.S. banks....Citigroup 2%, HSBC USA 8%...and JPMorgan a whopping 87%. The other 3% of the derivatives were held by the other 597 reporting U.S. banks. So, let's guess who the '3 or less' or '2 or less' U.S. bullion banks are [as stated in the BPR] that are short all that gold and silver on the Comex. I hope you're straight on this now.

I think you can begin to see why the CFTC is having such a hard time bringing this silver and gold price management scheme to an end, as they are up against all the power and all the money in the world...three big U.S. banks, the Fed, the Treasury...and the U.S. government itself. The CFTC and the SEC have known this for decades and have stonewalled every effort to get at the truth. They are, themselves, complicit. And it's actually worse than that. To use legal terminology...they are 'aiding and abetting'.

Before leaving this subject, I feel it necessary to point out that the red flags are flying for gold, because the bullion banks in the Commercial category are now short 17.8 million ounces of gold...well into the danger zone of a possible price correction. Will we get one right away? Beats me. We could tack on another couple of hundred bucks or so and drive the open interest [and short position] to even higher levels before the pin gets pulled. There's no feeling of froth or 'irrational exuberance' anywhere in the gold and silver markets that I can sense. The other thing that is strange is that the short position in silver is so low compared to gold. The dichotomy between the two is enormous. But with all the bad economic, financial and monetary news out there...I'm still 'all in'.

In other news, I see that John Williams over at shadowstats.com says that "January job losses were actually 716,000 net of concurrent seasonal factor bias...instead of the 'official' 598,000 loss." And also...based on his stats, the current unemployment rate is 18%.

The first story today is from California. In what is sure to become a nation-wide problem in very short order, "counties in California say they've had enough – and they aren't going to take it anymore. In what amounts to a Boston Tea Party-style revolt against the state Capitol, they're threatening to withhold money." The story, from The Sacramento Bee is headlined "Revolt brews in counties"...and the link is here.

And in a Reuters story, which doesn't need much explanation, is this headline..."Inflation specter has some investors pining for gold"...and the link is here.

The problem with socialism is that you eventually run out of other people's money. -- British Prime Minister Margaret Thatcher

Today's 'blast from the past' doesn't need any introduction whatsoever. Just turn up your speakers and click here.

What the rally in the equity markets was all about yesterday sure beats the hell out of me. Where was the good news? I must have slept through it. And I see, as I put this report to bed, that a story just posted at Bloomberg quotes the IMF saying that the advanced economies are already "in depression." There's that "d" word again. Expect to see it everywhere from now on.

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