From Ed Steer:

Gold's peak price for the day occurred at the London open...and from there it got sold off $10 until 9:00 a.m. on the Comex in New York. The gold price managed to regain half of that until 3:00 p.m. when someone pulled their bids and we had a waterfall decline in price during the thinly-traded after-hours market. One wonders how much more obvious these bullion banks can get? You will note on the Kitco gold chart below that for the second day in a row, gold's peak price was at, or shortly after, the London open. You should also note the 9:00 a.m. spike in Friday morning's trading in London [4:00 a.m. in New York]. It wasn't too clear on Friday's graph because of the scale...but on this graph it stands out like a sore thumb. Except for the magnitudes of the rises and falls...there is a great deal of similarity between Friday and Monday's charts. Free markets never trade like this.

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From the usual N.Y. commentator comes this..."In Vietnam, which has emerged in recent years as an important buyer of gold, the local price seems to be running about $20 below world”...not helpful. The country is reported to be exporting. Mitsui describes the general scrap inflow as "phenomenal". The Gartman Letter this morning switched its gold position to a long gold/short Euro one. This seems to reflect a view of the Euro rather than of gold...Of particular interest is the quite remarkable statement by veteran newsletter writer Richard Russell that his current gold position is his largest market commitment since he made his grubstake in the '58 stock market rally." [For more on this, see Peter Brimelow's article further down. - Ed]

Silver's chart for Monday is similar to gold's in many ways...not only on a daily basis...but also the price pattern in Friday's trading as well. Free markets never trade like this.

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The day after tomorrow [Thursday, March 26th] is options expiry in both gold and silver for the April contract. It's not a big delivery month for silver...but it certainly is for gold. Nothing would surprise me in the price pattern until then. First day notice for delivery into the April contract is March 31st. Volume in gold trading on Monday was 129,071 contracts with a switch effect of 32,200. The fact that the HUI and XAU finished in the plus column should be considered a triumph. Let's see how they fare today.

Open interest on Friday's activity showed the following changes. Gold o.i. dropped 957 contracts...and silver o.i. fell another 318 contracts. Although JPMorgan et al did their big number on both gold and silver during Globex electronic trading yesterday, I doubt there were a lot of contracts involved. I expect Monday's open interest numbers to show a decline in both metals...but not a big number in either. We'll find out at 1:00 p.m. today.

In an e-mail exchange with Ted Butler yesterday, I got the following information concerning the short positions of the '4 or less' traders [all bullion banks - Ed] in the Commercial category as of last Friday's COT..."in the current COT, as of March 17, the big 4 shorts in silver held a true net short position of 70.2% of the entire Comex silver market (after all spreads are removed). In gold, the equivalent numbers are around 59%, but the gold numbers are much more slippery than silver...For the Bank Participation report as of March 3, the '2 or less' big U.S. bullion banks comprise 45% of the entire net short silver position on the Comex...on a true net short basis. In gold, the '3 or less' U.S. bullion banks are net short 41% of the entire Comex gold market...with all spreads removed." [No manipulation to see here folks...please move along!]

In other gold news yesterday, there were a fair number of deliveries in silver as we approach the end of March. There were two issuers yesterday...Goldman Sachs [186 contracts] and Prudential Bache [102 contracts]. The three big stoppers were Bank of Nova Scotia [129], JPMorgan [102] and Triland USA [46]. There were a piddling 11 contracts delivered in gold. Silver inventories at the Comex-approved warehouses dropped 410,501 ounces. Over at the Zürcher Kantonalbank in Switzerland...their gold ETF added 71,548 ounces last week...and in silver, they added 571,733 ounces. I thank Carl Loeb for that info. The GLD fell about 10,000 ounces...probably a fee payment, and the SLV showed no changes. The SLV custodian, JPMorgan, [the biggest silver short on the Comex] is currently holding almost all the silver its prospectus allows. We await developments. However, there was a change at The Central Bank of the Russian Federation. In February they added about 200,000 ounces to their considerable reserves...bringing their total reserves up to 16.9 million "fine troy ounces"...as their website says. The other big changes yesterday were over at the U.S. Mint. I was surprised to see that they updated their numbers this early in the week. Their one ounce gold eagle coin mintings rose 29,000 to 96,000 month-to-date...and the silver eagle mintings were an off-the-charts 682,000 for last week, which brings the March silver eagle total to 2,407,000 which is a one-month record production if my memory serves me correctly. There are still eight production days left in March. Will the mint update again...or will they save them for April production? We'll see.

As an aside, I see in a report put out by Martin Weiss Research that they feel that [according to their index] 1,372 U.S. banks and 196 S&Ls are on the slippery slope. I thank Chris Lock for slipping me a copy.

I have four stories today. The first is from Reuters and is headlined "Falling greenback fuels BRIC dollar reserve rethink"..."China on Monday added its voice to a growing international chorus seeking the replacement of the dollar as the main reserve currency." The link is here.

The second story is also from Reuters [via the King Report]. The headline reads "U.S. regulator probing "rampant Ponzimonium"..."Hundreds of people in the United States are under investigation for financial scams, many involving Ponzi schemes, a U.S. regulator said on Friday." The link is here.

And in an op-ed piece in the New York Times, Paul Krugman admits that he's less than impressed with the bank rescue plan that was announce yesterday. He called it "the “cash for trash” plan proposed, then abandoned, six months ago by then-Treasury Secretary Henry Paulson. This is more than disappointing. In fact, it fills me with a sense of despair." [Note to Krugman: You, and a lot of other people, Paul – Ed] I thank Craig McCarty for sending that item along. The link is here.

And lastly, in his latest commentary at marketwatch.com, comes this excellent article by Peter Brimelow. It bears the title "Bugs triumphant about gold, terrified about U.S." This is well worth the read, as there's a lot of good stuff in it. The link is here.

US markets are not only back in inflation mode, they are in virulent inflation mode. - Bill King, the King Report, March 24, 2009

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We are definitely in uncharted waters...but nothing has changed. The rally yesterday was nothing more than a bear market rally fueled by short covering. It's obvious that the Fed and the U.S. government will stop at nothing to prevent a deflationary collapse...even if it means hyperinflation in the future...and they'll rig any market they have to, to get the job done. Gold should be screaming to the upside...but we all know why it isn't. It's been under steady [and increasing] pressure since 9:00 a.m. in London on Friday. I hope things have improved by the time I crawl out of bed this morning.

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.