From Ed Steer:

Gold was basically comatose all through Far East and European trading...with what activity there was, beginning [as is mostly the case] once floor trading began on the Comex in New York. Volume was decent in both metals, and both gold and silver's attempts to go vertical shortly before the London close got firmly stopped in their tracks. The usual New York gold commentator noted that a very large 80,482 gold contracts had traded by 11:00 a.m....with a total of 110,979 for the entire day.

I find it highly suspicious that the Dow hit its high of the day and the US$ hit its low of the day at precisely the same moment that the vertical gold and silver price rallies were cut off at the knees around 10:30 New York time. You can read into that whatever you want.

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Open interest changes for Thursday's trading are as follows. In gold, open interest rose 1,307 contracts to 361,418. Volume [including switches] was a respectable 100,278 contracts. Silver o.i. rose another 721 contracts to 95,439. Volume was on the lighter side...15,326 contracts.

Well, the contents of Friday's Commitment of Traders report [for positions held at the end of trading on May 12th] was no surprise, as it confirmed the price action of the last week or so. As I mentioned yesterday...it's the 'same old, same old' routine. Neither Ted Butler nor myself were happy about the numbers. In silver it showed that the technical funds in the Non-Commerical category had increased their net long position by 3,696 contracts...and ditto for the small traders in the Nonreportable category [those traders holding less than 150 silver contracts], as they increased their net long position by 1,432 contracts. Going short against them, as usual, were the bullion banks in the Commercial category. They increased their net short position by the same amount...the total of these two numbers...which is 5,128 contracts. Don't forget, there has to be a short for every long. The link to the full-colour graphics-intensive silver COT chart is here.

It was basically the same in gold. The technical funds in the Non-Commercial category increased their net long position by 8,886 contracts...while the small traders in the Nonreportable category increased their net long position by 1,849 contracts. The bullion banks in the Commercial category took the short side of all those trades to the tune of 10,735 contracts. The gold COT graph is linked here.

Even though the net short position in silver by the Cartel is deteriorating, it's still pretty low when you look at past history. But what concerns me the most, as I've been harping on for the last couple of months, is the large [and growing] short position in gold by the same crooks. Right now in gold, the Gold Cartel is net short 17.1 million ounces in the Commercial category of the COT. During the last twelve months or so, the Gold Cartel's net short position has varied between 6.9 million ounces when the gold price was at its lows late last year...and 25+ million ounces when the gold price was at its highs early in 2008. So there's lots of room for the gold price to run to the upside...and even more room for silver. But will JPMorgan et al, allow it?

I see in a mineweb.com story that Anglogold Ashanti cut their hedge book by another 154,000 ounces during the last quarter and pledges to cut another 150,000 ounces out of its hedge book in the current quarter. As of the end of March, the company had a hedge book of 5.84 million ounces. Between them and Barrick, these two companies hold at least two thirds of world's remaining forward sales. JPMorgan is the counterparty to a large portion of their respective hedge books. The entire story is linked here.

The Comex Delivery Report for Friday showed that 101 gold contracts were delivered. In silver a very large 782 contracts were delivered...finally! The big deliveries were by Goldman Sachs [220 contracts] and JPMorgan [562 contracts]. The big stopper was Bank of Nova Scotia with 556 contracts accepted.

I also noted yesterday that the U.S. Mint updated their gold and silver eagles numbers. Friday is a strange day for them to do it. Anyway, the changes weren't large. One ounce Gold eagle mintings rose a smallish 6,000...and silver eagles rose 55,000 to 1,089,500. My coin dealer [and the usual N.Y. gold commentator] both mentioned yesterday that lots of silver was available now and that premiums on just about everything were falling rapidly. There were no changes in either GLD or SLV yesterday...and Comex-approved silver warehouse stocks rose again...this time a smallish 265,915 ounces.

While the stock market is up sharply since early March, the economy as well as corporate earnings continue to suffer. Today's chart helps provide some perspective as to the magnitude of the current economic decline. It illustrates that 12-month, as-reported S&P 500 earnings have declined over 90% over the past 20 months [with over 90% of S&P 500 companies having reported for Q1/09], making this by far the largest decline on record [the data goes back to 1936]. In fact, real earnings have dropped to a record low and if current estimates hold, Q3/09 will see the first 12-month period during which S&P 500 earnings are negative. I thank P.S. for sending this along. The graph below tells all...

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I only have three stories today. The first is a GATA dispatch from last weekend entitled "Is U.S. buying back gold pledged to IMF for $100 billion?" It's a very interesting spin on the ongoing saga of IMF gold and who really physically owns it...or those who may have paper claims on it. The link is here.

The next item is from the Finance and Economics section of The Economist dated May 7, 2009. "But do not mistake the bottom for a vigorous rebound. Consumption may be growing again, but there is every chance it will remain depressed in coming years because of weak income growth, depleted wealth and tightened credit." That's the understatement of the year, in my opinion. I thank P.S. for sending the story along. It's entitled "Off their trolleys" and the link is here.

Lastly is commentary from Eric Sprott over at Sprott Asset Managment in Toronto. He and David Franklin address the question of the derivatives market in an article entitled "The Elephant in the Room". It's definitely worth the read, and the link to the pdf file is here.


My momma always told me, the bucket brings up what's in the well. - J.C. Watts

Today's blast from the past needs no introduction whatsoever. It's by the late, great Roy Orbison...and that should tell you all need to know. Turn up your speakers and then click here.

So what will happen to gold and silver next week? Beats me. However, the wonderful set-up that existed a couple of weeks ago in both metals has diminished somewhat...as it is obvious that the bullion banks are [again] going short against all longs in this rally. How long will this current rally last? Don't know that either. But what I do know is that until the bullion banks stop doing what they're doing, nothing will change...and they will remain firmly in control of the precious metals market...until they either give up, or are blown up.

All of us at Casey's Daily Resource Plus hope that you enjoy the rest of your weekend, and we all look forward to seeing you 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.