From Ed Steer:

The low for gold was at the Sydney open, and from there it rose slowly and steadily through Far East, London and Comex trading in New York. The high came in electronic trading about an hour after the Comex close. Gold managed to make it to $928...but was not allowed a sniff of $930 yesterday. Maybe today.

Although trading appeared quiet, the usual N.Y. commentator said otherwise..."Today's up $5 June gold Comex close [at $926.70] was quietly dramatic. A rally effort on the Comex open was contained under $3 on very heavy volume [41,523 lots estimated by 9 a.m.]. Very powerful attempts to move gold up after 12 noon were also blocked. Estimated volume jumped 25.6% in the 12 noon/1 p.m. space for a totally reversed gain of $2. An astonishing 36.4% [20,000 contracts] leap in estimated volume between 1 p.m. and the close [less than a tenth of the trading day] established a gain of less than $1. Final estimated volume was 120,029 lots. After the floor [Comex] close, gold was run up almost $2 and then was sold aggressively into the stock market close, losing almost $5. The gold shares did not like this and gave ground; however the HUI still closed up 2.76% on the day.

"The c. $930 level is being more violently defended than casual observers realize: it will be remembered there was a seller on the London a.m. fix today as well. But with India in buying mode, there can be only one result - unless the Reserve Bank can be induced to weaken the rupee." [Which is exactly what they did in early morning trading in the Far East today...and I'll let you know tomorrow if it made a difference in Indian imports today. - Ed]

Silver didn't do much until around 11:00 a.m. in London yesterday morning. From there, it ran up 50 cents...before, it too, got sold off exactly as gold did. The silver shares did really well yesterday.

Yesterday's brutal sell-off in both gold and silver produced the following changes in open interest. In gold, o.i. fell 1,601 contracts to 365,631 contracts on a volume of 122,086, including switches. In silver, o.i. rose a smallish 177 contracts to 94,673 contracts on light volume of 16,891...including switches.

In other gold news...and in further remarks from the usual N.Y. commentator..."there was a Reuters story yesterday that confirmed the revival of Indian gold demand...’Demand has increased many fold compared to last week as prices have fallen,’ said a dealer with a state-run bank in Mumbai. And further...’Indian jewellers chased gold bars as a firm rupee sparked buying... India is active. There's been good physical demand. The rupee could be a reason, but they haven't imported much gold for quite a while. It's time for them to replenish stocks,’ said a dealer in Singapore. The European Central Bank’s weekly statement of condition indicates that 'gold and gold receivables' fell €14 million last week which 'reflected the sale of gold by one Eurosystem central bank.' That is 0.63 tonnes: last week's sales was 0.54 tonnes. At present, the ECB squadron appears unwilling to be seen in the gold market."

There were no changes at GLD, SLV, or the U.S. Mint. At the Comex yesterday, there were 44 gold contracts delivered and 114 silver contracts as well. There's not much left to deliver in the May silver contract unless some new orders demanding physical show up before the end of the month. Over at the Comex-approved warehouses, silver stock fell a smallish 158,162 ounces...bringing the total Comex silver inventory to 119,527,422 troy ounces.

I see in a Bloomberg story that U.S. housing starts plunged to a record low in April, despite a gain in starts in single-family home. In a banner on Bloomberg's website, they were also bemoaning the fact that sales and prices were falling precipitously in the Hamptons, and the rich in California were defaulting on luxury homes just like the subprime victims. They also noted that Q1 home prices in southern California had fallen another 36% year/year. As I keep saying...call me in 2013 and we'll talk about a bottom in the U.S. real estate market.

I have five stories again today...and they're all worth your time...and I mean it. The first is a piece from Casey Research's own Managing Editor, David Galland. It's posted over at kitcocasey.com and bears the title "Tax Revenue Tanking"..."a disturbing trend on the other side of the equation is now emerging: how much [or rather, how little] the U.S. government is receiving in tax revenues." The link is here.

The second story is from Bloomberg. The BIS has released its bi-annual derivatives report for the last half of 2008. "The amount of outstanding contracts linked to bonds, currencies, commodities, stocks and interest rates fell 13.4% to US$592 trillion...the first decline in 10 years of compiling the data." Naturally, credit default swaps were right at the top of the heap. It appears that the entire derivatives market is in full-scale retreat at the moment. I guess it's easy to figure out where all that TARP money has been spent. The article is entitled "Derivatives Market Declines for First Time on Record" and the link is here.

And in the "You can't make this stuff up!" category is this Bloomberg story. In it, two economists are suggesting that a 6% rate of inflation for a couple of years "would make it easier for debt-strapped consumers and governments to meet their obligations. It might also help the economy by encouraging Americans to spend now, rather than later, when prices go up...if Americans were convinced of the Fed’s commitment [to higher inflation], they’d buy and borrow more now...". [You can check out any time you want...but you can never leave. - Hotel California] The headline reads..."U.S. Needs More Inflation to Speed Recovery, Say Mankiw, Rogoff" and the link is here.

Bloomberg also provides the fourth story today. This one was tucked away in one of the darker recesses of their website...and it was only by pure luck that I stumbled upon it. It [like the rest of the stories posted today] is worth reading. The headline says "Gold Demand Rises 38% in First Quarter, World Gold Council Says". The link is here.

And lastly is this piece by Rob Mackinaly of Financial Express in London. He reports that European gold ETFs are disputing each other's costs and claims of safety. It's turning into a pissing match extraordinaire, with Hugo Stalder, product manager at ZKB [Zürcher Kantonalbank] saying “If someone is looking for the best security, he looks at our ETF with a spread of 0.5 per cent and he may look at iShares where he’s not sure he has full coverage of gold.” Stalder said that this was not his view, but the view of some of ZKB’s clients. A spokesperson for iShares would not comment on the claim. [Not comment? Gee, I wonder why? - Ed] Mackinaly's story is headlined "$4 Billion Swiss Gold ETF: Paranoia Premium or Plain Expensive?" and the link is here.

Regulation of derivatives transactions that are privately negotiated by professionals is unnecessary. - Alan Greenspan...July 30, 1998

In closing, here's a Bloomberg story that just didn't make the cut. That was the news that Japan's GDP fell an annualized 15.2% in the first three months of 2009...as "exports collapsed and consumers and businesses slashed spending." The story was filed from Tokyo this morning. Welcome to the "greater depression." The only solutions left are "inflate...or die!" Inflation it will be...and lots of it.

See you on Thursday.

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