From Ed Steer:

The gold price declined slowly...in fits and starts...all through Far East trading...until shortly before lunchtime in London [7:00 a.m. in New York]. From there, a smallish rally began which really picked up steam shortly before the Comex opened at 8:00 a.m. The usual not-for-profit seller showed up at 8:30...which was the high tick for the day...and that, as they say, was that. From there, gold gave up[?] almost all its gains for the day and closed up $2.30 on the spot price from Thursday's close. Here's the Kitco chart that shows the New York activity only...from 8:00 a.m. until 5:15 p.m. Note the capping of the price at 8:30...and the point where the bullion banks pulled their bids at the London p.m. fix [10:00 a.m.]. As I've said many times, and I'll say it again...NO PROFIT-MAXIMIZING SELLER ever sells like this...EVER! This is price management pure and simple...just like Thursday.

click to enlarge

As for silver, it spent all its time within a dime of its opening price in the Far East...until it began to rise in lock step with gold in London. Its chart was almost a carbon copy of gold's, but silver did manage to tack on 23 cents before trading ceased at 5:15 p.m. in New York.

click to enlarge

On Thursday's price spike in gold, open interest jumped a fairly large 6,833 contracts to 376,596. As the N.Y. commentator said..."This is the first time in quite some while that an open interest increase has proportionately exceeded a gold price rise, and suggests overhead opposition is intensifying." Silver o.i. was up a smallish 667 contracts to 92,548. I'll certainly be interested in Friday's open interest numbers when they become available about mid-day on Monday.

As far as the Commitment of Traders report went, there was a marked improvement...as the bullion banks reduced their net short position by 2,937 contracts in silver. They would have done better if they'd broken through the 50-day moving average to the downside...but they didn't. In gold, the price did spend part of one day about $10 below its 50-day moving average, so the improvement in the bullion banks’ short position was more pronounced. There they reduced their net short position by 15,550 contracts. The bullion banks are still net short about 17.3 million ounces of gold and 179 million ounces of silver...75% of that amount [silver] is the '2 or less' U.S. bullion banks mentioned in the Bank Participation report...and the possibility exists that the lion's share of this short position is sitting with one trader only...JPMorgan.

The full-colour gold COT graph is linked here...and the corresponding silver COT graph is linked here.

In other gold news, the usual N.Y. commentator was quite animated about a news item that showed up in a CNBS story yesterday. Here are his words..."In an astonishing development, the Chinese Central Bank in its Annual Report, has predicted: 'in 2009...gold might scale a new peak.' This is amazing! For a generation [under, I believe, heavy pressure from Washington] Central Banks have been silent or grudgingly cool about gold. And they have bought very little--particularly the FX reserve obese Asian CBs. An astute observer today insinuated that the comment means the Chinese have completed an initial buying round. My own view is that they are signaling to the U.S. administration that they seriously considering ending the Yuan undervaluation/Export bonanza/U.S. Treasury buying model for their relationship with America." [We'll see. - Ed] The link is here.

There were only 57 contracts delivered in gold on the Comex on Friday...and none at all [again] for silver. This was the fourth day in a row that there has been little or no silver deliveries on the Comex...with 831 contracts still sitting on the books to be delivered. Ted Butler wonders what's up...especially when March silver is still in backwardation to the May contract by a cent and half. It may mean something...or nothing...but this is not normal 'business as usual' in Comex silver. There were no inventory changes for either gold or silver eagles reported by the U.S. Mint...and no change in Comex silver stocks. Surprisingly enough...GLD added a rather substantial 491,000 troy ounces to their alleged gold stash...bringing it up to a new record high of 1,056.82 tonnes. The SLV was unchanged.

click to enlarge

It was a slow news day on Friday...at least there wasn't much that caught my eye. However, I do have three stories.

The first is from the Atlanta Business Chronicle. It's a week old, but still interesting, as another state...this time Georgia...ponders using gold and silver coins "for the repayment of debts to the state, notably all state taxes." More and more of these stories keep popping up. The headline reads "Georgians could pay future state taxes in gold" and the link is here.

And in a story posted at the Financial Times in London, is this headline..."Berlin and Paris unite ahead of summit"..."The leaders of France and Germany joined forces on Thursday to insist that next month's G20 summit focus on tougher global financial regulations, rejecting US calls for European states to spend more on supporting growth." The link is here.

To show you how slow a day it was in the hard news department...here's a story that's been sitting in my e-mail system since September 22, 2008. Normally I wouldn't have given this story a second thought, but it was posted at timesonline.co.uk...which is a fairly reputable British rag...so I thought I'd save it for a rainy day. That day is now...and I thank P.S. for the story. Don't laugh when you read the title..."Japan hopes to turn sci-fi into reality with elevator to the stars". "Beam me up, Scotty. There's no intelligent life down here."

True individual freedom cannot exist without economic security and independence. People who are hungry and out of a job are the stuff of which dictatorships are made. - Franklin D. Roosevelt

While we're still dreaming of outer space...here's a music video that really fits. It's not from that long ago...and is one of the few songs from the last 20 years that floats my boat. Turn up your speakers and then click here.

The Dow looked real shaky for a while on Friday...and the decline was starting to look terminal during the New York lunch hour. But someone showed up to catch a falling knife...and made sure that the Dow ended on a positive note for the week. As GATA's secretary treasurer said in Washington last April..."There are no markets anymore, only interventions."

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

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