From Ed Steer:

With American and British equity markets closed on Monday, there wasn't a lot of activity in the gold and silver markets either. Both got sold off a tad in Sunday night electronic trading and during Monday in the Far East...but both recovered during European trading hours at, or after, London opened for the day. The highs...such as they were...were after the London close.

On Monday evening a more serious seller showed up in the New York access market, and by the close of Tuesday afternoon trading in Hong Kong, gold had about $17 shaved off its price. That was its low of the day, and a rally ensued in London that lasted until Comex trading began in New York at 8:15 a.m. yesterday morning, when another not-for-profit seller showed up. The New York low in gold was at precisely 9:30 a.m. Eastern Daylight Time. From there, another rally lasted until shortly after Comex trading ended.

Silver's activity on Tuesday was nearly identical to gold's...except for two things. The low for the day came at the London silver fix...which is noon in London...7:00 a.m. in New York. And the other difference was that silver's high of the day came at 12:00 noon during Comex trading hours in New York.

Volume was very heavy yesterday, as it was Comex options expiry for the June contract in both gold and silver...so there were lots of every kind of activity that you can imagine. The usual N.Y. commentator mentioned that..."by 9 a.m., estimated volume was a staggering 101,893 lots"...and "total estimated [daily] volume was 226,298 contracts, the highest since March 25th." Over the Counter [OTC] options expiry occurs today or tomorrow. First day notice for June delivery is this Friday.

Open interest changes for last Friday are as follows. Gold o.i. tacked on another hefty 5,840 contracts. Volume was a chunky 159,978 lots...but a lot of that was options expiry related, so by the time the spreads and switches were netted out, the number would be a lot less impressive. Total open interest in gold is now up to 396,763 contracts, which is the highest this year...and the highest, as the usual N.Y. commentator points out..."since September 15th last year. The stakes are getting high." [Yes...they are indeed! - Ed] Silver o.i. rose a smallish 673 contracts, with 23,769 contract traded and o.i. now up to 96,769.

All of Friday's trading activity [plus Tuesday's] will, hopefully, be in this Friday's COT.

In other gold and silver news, I see that the Comex Delivery Report for Monday showed 6 gold contracts and 71 silver contracts delivered. There's almost nothing left to deliver in May silver, so I'm not expecting any delivery problems to show up during the rest of the week. Over at the Zürcher Kantonalbank in Switzerland, last week's additions to their gold and silver ETFs were razor-thin...or non-existent. Their gold ETF rose a very small 19,883 ounces...and silver showed no change at all...not an ounce! I thank Carl Loeb for that info. There were no changes reported by the U.S. Mint, or by GLD or SLV yesterday...although I'm sure that they're both owed metal...especially the SLV. According to the usual N.Y. commentator..."The European Central Bank weekly statement of condition indicated a fall in 'gold and gold receivables' of €14 million, which 'reflected the sale of gold by one Eurosystem central bank". This is 0.63 tonnes at the present book value -- exactly the same as last week. Clearly the ECB group does not care to be seen in the market at present....The Austrian Central bank, in its Annual Report, said it sold no gold in 2008."

One last tidbit on gold before I head into all the stories I've got. The following is the third time that I've seen this comment pop up on the Internet in the last couple of weeks. I've seen no official [or even unofficial] documentation to substantiate it...that's why I never commented on it before. But this time it appeared in The Privateer out of Australia on Saturday, where Bill Buckler commented..."Germany recently demanded that all their Gold held in ‘custodial accounts’ in the US be returned to them." GATA consultant, James Turk, in a piece he did back almost a decade ago, came to the conclusion that the 1,900 tonnes of [supposed] U.S. Treasury gold held at West Point...which was actually classified as 'custodial gold' by the Treasury Department [shortly before it became 'deep storage gold']...is actually owned by the Germans, in a swap arrangement [with the U.S.A.] done a decade ago with 'Bubba'...Germany's Bundesbank. Is there any truth to this...fire to go with the smoke? I don't know...but nothing [and I mean nothing] would surprise me in the super-secret gold world. Here's Turk's April 23, 2001 essay entitled "Behind Closed Doors". It's an education and a must read. The link is here.

Because of the U.S. long weekend, I have so many stories in my in-box that I'm not even going to attempt to get them all in today's rant. My editor gives me pretty much 'free rein'...but even I know there are limits. I'm just going to run the stories that are precious metals-related. The rest will have to wait.

The first story is one that passed through my in-box about a week ago. Its importance [at the time] went right over my head...and I deleted it...as I thought it a bit of a gimmick. However, after sober second thought, and seeing it mentioned on the Net a few times since, I've reconsidered. The piece, a Reuters story that showed up at yahoo.com, is entitled "German firm plans gold ATMs to meet growing demand". I thank reader Tom Mortensen for bailing me out on this one. The link is here.

The next piece appeared as Saturday reading in The Telegraph out of London. It is, of course, from Ambrose Evans-Pritchard. It's certainly worth the read. The article is entitled "Gold bugs at last have their perfect trinity"...and the link is here.

Next is a very special presentation. It is a rare privilege for me to put up a paper done by GATA consultant, Reg Howe. It's commentary on the latest gold derivatives situation as reported by the Bank for International Settlements [BIS] last week. I will tell you right up front that some of it is pretty heavy reading. Don't feel inadequate if some of this is slightly beyond you...as I'm somewhat in the same boat myself. However, it's not overly long...and if you read it carefully a few times...you should get the 'big picture' feel of it, plus some of the details that are very understandable. The piece, entitled "Gold Derivatives: The Tide Turns" is contained in a GATA release, with a 'must read' preamble by GATA's secretary treasurer, Chris Powell. The link is here.

In a report filed one minute after midnight on Monday morning, is this most excellent commentary by Peter Brimelow over at marketwatch.com. In it, Brimelow outlines all the bullish cases presented by a long list of precious metals commentators. He qualifies his headline "Gold on verge of historic breakout?" with a question mark...a most excellent precaution in my humble opinion. The link is here.

The next story is [Sprott Asset Management's chief investment strategist] John Embry's latest contribution to Investor's Digest of Canada. It's my opinion that whatever John has to say is worth hearing...and this piece is no different. It's entitled "China, western central banks out of sync on gold". The link to the pdf file is here.

Next is a piece out of the business section of The Times in Johannesburg. It's entitled "AngloGold stumbles over hedges". I'm more than familiar with what happened to AngloGold and Ashanti Gold way back then. Not mentioned here are the obscene profits made by the bullion banks on the resulting gold carry trade...and the effect of all the forward sales on the gold price. Barrick was the biggest culprit by far, but AngloGold was a close second. GATA was forceful in its presentation to Bobby Godsell [and all other major gold producers] that hedging would hurt their company and their industry. We were ignored...and you can read the results in this article. The link is here.

And lastly, finally, is silver analyst Ted Butler's latest commentary. In it, Butler reviews the latest COT report and finds the usual suspects, the biggest four traders, overwhelmingly short again and never [net] long, with the total market short position overwhelmingly concentrated and the long position fully dispersed -- proof again of market manipulation. Further, Butler reports that while his clamor provoked the most recent investigation of the silver market by the U.S. Commodity Futures Trading Commission, the commission has yet to interview him even as the supposed investigation is now 9 months old. Butler asks his readers for one more round of agitation with the CFTC. His commentary is headlined "Another Smoking Gun" and the link is here.

My belief is that we're now nearing the beginning of the third speculative phase of the great gold bull market...If June gold can close above $1,003, I believe that will signal the beginning of gold's third speculative phase. The cartel tried to knock it down under $940. June gold was down $10 at the opening, but closed down only $5.60...which I thought was impressive. Only three more trading sessions this week, and they should be exciting. - Richard Russell, 26 May 2009

From your lips, to God's ears, Richard!!! We all [including Ted Butler and myself] desperately want to believe that "the cartel" [as even Richard Russell now calls them] are going to get blown out of the water with a monster short position on in both gold and silver. We are at the crossroads...the moment of truth right about now. Either they are...or they aren't. Past history says that they're going to smash prices again. One of these days, history will not repeat itself. Is it now? I don't know...but we'll find out soon enough.

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.