From Ed Steer:

For the umpteenth day in a row, the gold price was taken down the moment trading began in the Far East on Friday morning. This is most tiresome...but most predictable. Any mathematician, with a calculator in hand, would tell you the odds of this being a random event is tens of millions to one...if not more. Anyway, gold was sold down about $15 from the Far East open in Sydney, until the London p.m. fix at 10:00 a.m. New York time. From there, gold proceeded to recover about half its losses before Globex trading closed at 5:15 p.m. Estimated volume was only 80,204 contracts...and with a switch effect of 13,028...net volume was only about 67,100 contracts or so.

Silver had a very interesting 24 hours. Like gold, it too got sold off the moment Globex trading began. The first bottom came at 5:00 a.m. New York time...with the second bottom four hours later at 9:00 a.m. From there, it was away to the races. My guess is that someone was short covering. Silver managed to not only gain 17 cents on the day...but its low-to-high price move was 40 cents...gaining back everything it had lost the day before. Below is the 3-year silver graph. Note the way the price has just broken through its 200-day moving average for the first time in over six months. The boyz really did a number on it last July.

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Gold open interest on Thursday showed a largish increase...at least compared to the small gain in price. It rose 4,177 contracts to 360,894. Silver was also up...1,183 contracts to 97,079. We are nowhere near record-high levels of open interest in either metal [especially silver] compared to where we were last year when the gold price went over $1,000. But even though the open interest isn't as high, what open interest there is, is now super concentrated in the '8 or less' traders in the Commercial category of the COT...especially in gold. Silver open interest is super concentrated in the '4 or less' category.

The Commitment of Traders report yesterday was no surprise to either Ted or myself. The tech funds [Non-Commercial] and small traders [Nonreportable] went longer...and the bullion banks [Commercials] took the short side of every long purchased...with no exception. It's the same old, same old. Here are the numbers: In silver, the tech funds went net long another 1,707 contracts, while the small traders went net long 157 contracts...while 'the boyz' went short 1,864 contracts...[1,707+157=1,864]. The numbers match perfectly, and they have to...as there has to be a long for every short...and vice versa.

In gold, the tech funds in the Non-Commercial category went net long 8,316 contracts, the small traders in the Nonreportable category went net long [by reducing their short positions] 2,807 contracts. In contrast, the boyz increased their net short position. This they did by selling 1,868 longs and going short an additional 9,255 contracts...for an increase in net short positon of 11,123 contracts...[1,868+9,255]. If you add up the two long numbers from the techs and the small traders, they total 11,123. Here's the link to the lastest COT report from the CFTC. Click here.

But what has changed over the years...and really went off the charts last July...is the concentration of the short positions...the tiny number of bullion banks that hold colossal short positions against everyone who is long. As you know, the COT report came out yesterday, for positions held at the close of trading on Tuesday, February 10th. This is what it showed.

In gold: '4 or less' bullion banks were net short 64% of the entire Comex gold market
'8 or less' bullion banks were net short 80% of the entire Comex gold market

In silver: '4 or less' bullion banks were net short 68% of the entire Comex silver market
'8 or less' bullion banks were net short 75% of the entire Comex silver market

If these bullion banks had a name, it's my bet that the first three names on the list for both gold and silver, would be the same. It's also my bet that JPMorgan is number one in both. A list of the 'usual suspects' [including JPMorgan] can be found in the list of 'Market-Making Members' posted on the LBMA [London] web site. The link is here.

In other gold news today, the usual N.Y. commentator reported that "the Bombay Bullion Dealers Association told Reuters on Friday that so far this month, India has imported no gold." And what is now becoming an expected daily occurrence...the GLD ETF added another 491,500 troy ounces [15.29 tonnes] to their alleged stash. The silver ETF, SLV, did not update their website on Friday. And lastly, Ted Butler pointed out yesterday that the GLD ETF added 5.0 million ounces for all of 2008. However, since January 1, 2009...they've already added 6.0 million ounces!

From precious metals to real estate. The commentary and graph below are courtesy of Bill Murphy over at lemetropolecafe.com. I saw this graph for the first time in January of 2007...which is 'month one' on this graph. I had just started my 27th year in real estate, and within a week of seeing that graph, I made the decision to get out of the business. Please read the accompanying commentary careful...and study the graph closely. "Hi Bill...following on from Dave from Denver yesterday, the enclosed graph shows that the Sub-Prime problem pales in comparison to the next extended 2nd wave of loan resets and associated defaults that is about to hit. With the bulk of the Sub-Prime ARM resets out of the way, we have another wave of Alt-A, Option ARM and Prime ARM resets to undergo. This will be an additional blow on top of all the other financial fallout that is currently hitting the fan.
"With an already cash-strapped US home owner, and an already battered US economy, the ensuing fallout may be multiples of the Sub-Prime defaults. Also bear in mind this graph is somewhat out of date and the bars may be even higher than shown, but definitely not lower. Rgds, LT"

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Today's first item is a short, 4-minute video clip from marketwatch.com. It's an interview with the now-famous John Williams over at shadowstats.com. It's worth the listen as he talks about "US$100 bills as toilet paper". I thank Craig McCarty for sending it along...and the other two pieces below. The link is here.

In another story posted at marketwatch.com, is this one from the U.K. entitled "Lloyds shares plunge on HBOS' pretax loss". Lloyds is Lloyds Banking Group...and HBOS is the Halifax Bank of Scotland. There is huge trouble in the British and European banking systems. This is just another brick in the wall. The link is here.

And lastly, comes this most important offering from Ambrose Evans-Pritchard at The Telegraph in London. The title of the article will certainly set you back on your heels..."Europe's industrial base may never recover from crisis"..."The European Commission has issued a red alert over the unprecedented collapse of industrial production, warning that EU states are running out of money for rescue packages." The story is a 'must read' and the link is here.

O gold! I still prefer thee unto paper, which makes bank credit like a bank of vapour. - Calvin Coolidge

I can tell by the length of this rant that I kind of 'pulled out all the stops' today. And while I'm on the subject of that expresion...most people have heard it, or used it...but have no idea of its origin. It comes from the world of the pipe organ. If you 'pull out all the stops' all [or most] of the pipes will play when you play the keyboards [manuals, in organspeak]. The music is loud...but not always pleasant...and if you get that same feeling about my commentary today, I'll certainly understand.

Anyway, today's selection is from what Mozart called, "the king of instruments". The baroque organs of the early to mid 18th century were a sight to behold. Most organs were built for the churches of the day...and the grander the better...the more to 'shock and awe' the worshipers. This particular organ has a name..."Dreifaltigkeitsorgel". It was built by Karl Joseph Riepp (1757-1766). It resides in Ottobeuren in southern Germany. These large organs were all manually controlled, as this was 150 years before electricity was discovered...and it required an extra person to be there to "pull the stops"...as the organist was far too busy playing [most of the time] to do it himself. The organist is the late [and very great] Karl Richter. The piece is known to all...J.S. Bach's Tocatta & Fuge in D minor, BWV 565. This is an audio [and visual] extravaganza, so turn up your speakers, pay attention....then click here.

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Talking about 'shock and awe'...the above graph speaks volumes. For example, it currently takes 8.4 ounces of gold to 'buy the Dow.' This is considerably less than the 44.8 ounces it took back in 1999. When priced in gold, the Dow from 1999 to Friday is down 81%. In the near future, we'll probably be looking at a Dow/Gold ratio of 1:1...or less. That's why you should be buying it with both hands...as the ultra-rich, shoveling money into the gold and silver ETFs as of late, have finally got it figured out too.

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

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