From Ed Steer:

Gold gained about $8 in the first eight hour of trading in the Far East yesterday morning. The top came shortly after 3:00 p.m. in Hong Kong...and between that time, and the Comex open, gold gave half of that gain back. Then we were treated to that [by now] familiar chart pattern...with the worst damage occurring once the London p.m. gold fix was in at 10:00 a.m. New York time. Between its high in Hong Kong and its low in New York...gold got hit for around $23.

Silver's flight path was similar to gold's...with the high at the same Hong Kong time as gold. However, the real sell-off in silver didn't begin until the London p.m. gold fix at 10:00 a.m. New York time [3:00 p.m. in London]. From that point, silver 'lost' about 48 cents in an hour...to go along with the 21 cents it lost between its Hong Kong high and the London p.m. gold fix. The silver chart is typical of what a market looks like when the bullion banks pull their bids and the tech funds puke up their longs and are forced to sell into a vacuum as sell stops are hit. But I only give JPMorgan a 8.9/10...as the decline wasn't more than a dollar...and I know they can do it, as I've seen it happen before.

click to enlarge

Both metals gained something back from their lows of the day...but not much.

Of course both gold and silver 'fell' in lock-step as the US$ 'rose'. If you check the one day US$ chart below...along with the silver chart above [gold is the same], you'll note that the dollar gained 70 basis points [well under 1%] between 8:30 a.m. and 10:45 a.m....the exact time frame that both gold and silver got hammered. Platinum, too. On Thursday and Friday of last week, the US$ fell over a cent in one 24-hour period...during which time New York gold gained a whole four dollars. I commented several times last week that gold was not being allowed to close above $940...regardless of what the dollar did. It's my opinion that what happened yesterday was a deliberate act. The bullion banks make sure that gold and silver prices fall faster than they rise...despite what the currencies are doing.

click to enlarge

Open interest changes for Monday were disappointing. Gold o.i. rose 134 contracts to 378,567....on very small volume of 61,810 contracts. Silver o.i rose 1,711 contracts to 104,499 on volume of 30,015 contracts. I was hoping/expecting better. Tuesday's open interest numbers should show quite a drop when they become available later this morning.

Yesterday was first day notice for July delivery. Both Ted and I were amazed at how few contracts were delivered...only 169 in gold contracts and 253 in silver. There were no changes in SLV yesterday...but over at the GLD 166,914 ounces [5.19 tonnes] were taken out. As expected, the U.S. Mint did not update its eagle mintings for the end of June. However, the month-end numbers were impressive anyway...with one ounce gold eagle mintings at 113,000 and silver eagles at 1,945,000. For the first six month of 2009...totals in both are very impressive. In gold y-t-d 667,500 have been minted...and in silver eagles y-t-d it's 13,524,500. Over at the Comex-approved warehouses, another 666,523 ounces of silver were withdrawn from their inventories.

Tuesday was a slow news day for gold...but the usual New York commentator had the following..."The European Central Bank weekly statement of condition indicated a decline of €96 million [4.33 tonnes] in 'gold and gold receivables'...attributed to a sales by one captive central bank and sales of gold coin by two others. Last week saw a sale of 0.9 tonnes reported."

With the 50-day moving averages having been broken to the down side again in both precious metals, some serious consideration has to be given to the fact that the 200-day moving averages are now in the sights of the bullion banks. There has been surprisingly little long liquidation by the tech funds [and therefore short covering by the bullion banks] despite the fact that we are already down $65 from gold's high a month ago. In silver, we are down over $3 from the highs of early June. If...and it's not a very big if...the bullion banks continue to flush out the spec longs and cover as many of their own short positions as they can...I figure that we've got at least $75 left in gold and $2 to the down-side in silver. Those are minimum numbers too! In other words, we will have to give back all the gains from the April 19th bottom before we find another bottom.

But, we could also go to new record highs...starting right now. All that JPMorgan and HSBC et al have to do is stand aside with their hands in their pockets and do nothing...and we'll have $1,000 gold in a few hours...or less! Only the bullion banks are prepared to go short against all comers in this market. That's why the price does what it does...and is where it is.

I have three stories and a five-minute CNBS video clip today.

Let's start with the video clip. For five minutes Monday morning, CNBS market analysts discussed how obvious U.S. government manipulation of the financial markets has become. If manipulation is obvious to these analysts now, soon even some mainstream gold market analysts may have trouble denying it. The video is linked here.

The first story is from The Telegraph in London. This short blog by their economic editor, Edmund Conway, is entitled "Probably the worst three months for the economy since the 1920s" The link is here.

Here's another story about the dire straits that the U.K. finds itself in. This one's from Bloomberg. This year's government deficit will hit 12.4%...and reach 17% of GDP in 2010. The story is headlined "Sterling Crisis Looms as U.K. Unraveling Points to Budget Cuts". I thank Craig McCarty for the story...and the rest of the morbid details are linked here.

And lastly comes another story from The Telegraph. This one was filed by Ambrose Evans-Pritchard on Sunday, June 28th, and comes courtesy of the King Report. It's entitled "China's banks are an accident waiting to happen to every one of us"...and the link is here.

Alexis de Tocqueville...like other students of politics...was familiar with the concept of democracy, which history and reason informed him was the intermediate stage between republicanism, and either despotism...or civil war. - The Life and Times of Andrew Jackson by H.W. Brands [page 455]

With gold and silver being taken to the cleaners yesterday, it was a sure bet that when the U.S. equity market tanked, nobody would be taking their money out of them and putting it into the precious metals. I wonder if that was part of the plan as well. I'm not sure how long it will take the bullion banks to cover as many of their short positions as they can. Are they in a hurry...or are they going to take their sweet time about it? My bet is that since they're in total control of the gold and silver markets right at the moment, they will drag this process out as long as they can. But whether or not they can, or will, do it...will be something that is only known in the fullness of time. I wish I had happier news than that, but I don't...as I have past history on my side.

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.