From Ed Steer:

Gold spent most of Far East and European trading hugging $890...and silver spent the same period within a dime of $12.70. Nothing to see here, folks! Then, shortly before the Comex open, both metals began smallish rallies...and half an hour after the Comex opened for business, it was lights out.

Not only did the dealers pull their bids in both metals, but I highly suspect that there was actually some fresh shorting by the Non-Commercials and Nonreportables [in the COT] as well.

As I've been saying for the last week or so, an assault on gold's 200-day moving average would materialize sooner or later, as a couple of the U.S. bullion banks [JPMorgan and HSBC USA] still had huge short positions to unwind. Well, this could be the start. And whether or not they are going to take their sweet time about it...or have it all over and done with by lunch time in New York today...remains to be seen.

Don't forget that despite their attack on gold...silver is still the centre of the universe for the bullion banks. That's why the attack on silver was far more ferocious than on gold If these two bullion banks [and a couple of others] have to cover some of their shorts with physical metal, there are central banks that can [and will] come to their rescue. The last time that happened was during the rescue of Long-Term Capital Management. They were short about 300 tonnes of the stuff. This option does not exist in silver because there just isn't any...except for what's sitting on the Comex in the USA...or in the SLV ETF in Britain. The bullion banks most likely own some of that silver, but there's no way for us to tell.

So, how low could they take gold on this move to the downside? Just looking at the 2-year gold chart posted below, it would be my guess [in a worst-case scenario] that we could see gold in the $825 range, before it became ridiculously oversold. We'll find out, as they say, in the fullness of time.

click to enlarge

Wednesday's trading activity in gold showed a decline of 787 contracts, reducing the open interest to 336,143 contracts. In silver, o.i. fell a measly 17 contracts to 94,551. Thursday's o.i. numbers, when they become available around noon Eastern time, should be interesting...as will be the COT report when it comes out at 3:30 p.m. today.

According to the Comex Delivery Report, there were a decent amount of gold contracts delivered yesterday...429 to be exact. The big deliveries came from the Bank of Nova Scotia [320] and Prudential Bache [102]. The big stoppers were Bank of Nova Scotia [188] and JPMorgan [127]. There were four contracts delivered in silver. Over at the Comex-approved silver warehouses yesterday, another 305,864 ounces were taken off the exchange...the lion's share came from Brink's, Inc. There were no changes in the SLV ETF...but over at GLD, it was reported that 8.25 tonnes were removed...265,200 ounces troy. As the usual N.Y. commentator stated..."This was the first significant change since March 24th: GLD itself lost 7.5% over that period."

The N.Y. commentator also had this to say..."The Bombay Bullion Association has announced that imports into India for the first half of April were 10 tonnes, compared with 25 tonnes for all April last year. Imports in Q1/09 were, of course, negligible – in fact, some gold is said to have been exported.” This is supported today by John Reade at UBS..."We updated our Indian gold sales database yesterday and note that the sporadic [holiday-interrupted] demand we have noted over the past couple of weeks has turned into a modest bounce in our index...including some reasonably strong demand yesterday. This clearly suggests to us that India is de-stocked after the recent scrap outflows from the country...and that buying is taking place ahead of the April 27th festival. This bodes well for demand later in the year and suggests that any further major correction in gold will see solid buying." Reade also reports Western demand is still present: "...we have had some detailed conversations with our Zurich-based physical gold experts and also with some contacts in the refinery industry. We can confirm that coin demand remains strong, with sales limited only by coin availability...and scrap supply has slowed to a trickle compared to the floods seen in Q1." As a result of the powerful early Comex selling raid [the 3rd in three days] The Gartman Letter is now short another gold unit...Now the trick will be to get out profitably. With what appears to be a sea-change having come over the Eastern physical market, this might not be so easy. Is this a bear trap in the making?

In other gold and silver news, I see in a yahoo.com news story that Central Fund of Canada has completed the sale it announced last week. The final numbers are as follows...in gold they added 123,700 ounces, and in silver the total came to 6,188,000 ounces. It will take them a couple of weeks to get the gold...and heaven only knows how long to get all that silver. They won't tell you, even if you ask nicely. All inquiries in prior offerings, at least by this humble scribe, have been met with stony silence.

I have three stories today. The first one has received a lot of press already. This one comes from Bloomberg and bears the headline "General Growth Files Biggest U.S. Property Bankruptcy". As I've mentioned on several occasions this year...commercial real estate is one of the shoes yet to drop. Here's the first sign of big trouble...and as a Realtor with 27 years of experience...I can tell you that it's going to be horrible beyond belief before this is all over. I thank P.S. for sending me the story...and the link is here.

My second story is also from Bloomberg. The headline reads "Dresden Job Losses Leave It Reeling as East German Boom Fades". It appears that the bloom is off the rose in the formerly communist eastern Germany. I thank Craig McCarty for the story and the link is here.

The last story is from the Financial Times in London. It carries the very provocative headline "Is America the new Russia?" It would appear, in certain important respects, that's exactly what's happening...although some people would call it Fascism instead. It's hard for me to believe that things could have come to such a state in the U.S.A. But if you've read G. Edward Griffin's classic tome: The Creature From Jekyll Island: A Second Look at the Federal Reserve...you won't be the slightest bit surprised. I once again thank P.S. for sending me this story, and the link is here.

Today, being Friday, will be an interesting day in the New York markets. As I put this to bed at 3:00 a.m. Mountain Daylight Time, I see that both gold and silver have taken tiny swan dives in early London trading. Not a lot...but it's probably enough to set the tone for the precious metals market for the rest of Friday trading...which has 15 hours and 15 minutes to go as I hit the 'send' button to my editor. Be ready for anything.

All of us at Casey's Daily Resource Plus look forward to seeing you right here once again on Saturday.

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