From Ed Steer:

The high in gold on Wednesday turned out to be the Tuesday closing price of $924.10...as gold was under pressure right from the open in early Thursday morning trading in the Far East...as the New York bullion banks get about an hour head start before Sydney opens for business. This happened because the N.Y. bullion banks close for business at the end of one trading day...and open for business 45 minutes later for early morning trading in the Far East in the next calendar day. That 45 minute gap is the only time during the day that gold is not traded anywhere in the world. Note that on the Kitco gold chart below.

After that, gold had a double top at the beginning of trading in London yesterday morning. Between the London open and the London close, gold shed another $7. But once London closed at 11:00 a.m. Eastern time, the rug really got yanked, and another $13 got carved off the price in short order. After the bottom for the day, which came at precisely 12:30 in New York, gold recovered $5 in what was left of Comex trading...but once electronic trading began after the Comex close, the gold price flat-lined.

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Silver didn't really develop a downward trend until 11:00 a.m. in London...while the east coast of the U.S. was still sound asleep. From there, silver was under considerable pressure [with even more pressure coming once London closed] right up until its low tick of the day, which occurred at 12:15 in New York. From there, silver recovered about 15 cents before trading closed.

I wasn't expecting much of a change in open interest for Tuesday's trading...and I guessed right. But I was also happy that both numbers showed an improvement. In gold, o.i. fell another 1,632 contracts to 372,985...on decent volume of 88,693 lots. In silver, o.i. also fell...in this case by 619 contracts to 100,376...on smallish volume of 16,573 contracts. Because Tuesday was the cut off for Friday's Commitment of Traders report...this data will, hopefully, be in it tomorrow.

Yesterday's trading volume was monstrous...with huge liquidation in both gold and silver as well. Today's open interest report should be impressive. In retrospect, I shouldn't have been surprised at Wednesday's big down day in both metals...and [probable] massive open interest decline...as it's too late for tomorrow's Commitment of Traders report...so this data won't show up until next Friday's COT report on the July 17th. This is standard operating procedure when the bullion banks want to hide what they're doing until the last possible moment. I've mentioned this trading pattern on many occasions.

The Comex Delivery Report for Wednesday didn't show a lot of activity...as most deliveries for July are already done. There were 17 gold contracts and 24 silver contracts delivered. Over at GLD, there was a rather large 333,798 ounces removed from their stockpile...and at SLV there were no changes...again. The U.S. Mint is a busy place these days! For the third day in a row they have updated their gold and silver one ounce eagle mintings. Gold eagles rose another 6,000 to 18,000 so far for July...and silver eagles are up another 200,000 to 650,000 for the month. Over at the Comex-approved precious metals warehouses, a smallish amount of silver was removed from inventory...74,327 ounces.

The usual N.Y. gold commentator had a few things to discuss yesterday...and here they are..."This morning's weekly statement of condition from the European Central Bank indicated a €5 million fall in 'gold and gold receivables' attributed to a sale by one captive central bank. This is a derisory 0.23 tonnes [7,510 ounces] - last week's quantum was 4.33 tonnes. Perhaps it was an option being exercised. The recent behavior of the European central bank flock suggests that the 403 tonnes of IMF gold is desperately needed to sustain the 400-500 tonne central bank pace of the last decade."

And then in commentary late yesterday evening, this was added..."UBS raises the implication that gold and silver, with huge stock/consumption ratios and politically insignificant private sector consumers, might escape: 'we believe that gold and silver, with vast above-ground, liquid and near-to-market stocks, are the only traded commodities that are not a play on scarcity...We suspect gold and silver will be at the bottom of this list, if they are on it at all.' Andy Smith has been arguing for some time now that the precious metals could well emerge as the only venue for the expression of what one might call 'Free Market' sentiment. There is, of course, considerable evidence that these metals, especially gold, have been under political price management for the better part of 20 years. But after so many years of official sector selling, the question becomes as to who will take up the selling slack when central bank dispositions come to an end."

Ted Butler would vehemently disagree with what UBS and Andy Smith had to say in the previous paragraph. He feels that [and I'm not disagreeing] the CFTC et al will use the upcoming legislation to enforce position limits as an opportunity to get these grotesque short positions in both gold and silver cut down to size. I spoke about this yesterday But regardless of who is right...or wrong, we won't have to wait too long before we find out.

After yesterday's pounding, it's now a pretty good bet that the bullion banks are going to "go the distance" and take both gold and silver prices below their respective 200-day moving averages. And despite the big liquidation yesterday...the still gigantic gold short position is the 800 pound gorilla sitting in the living room. Last year at the October lows, the bullion banks only had a short position of around 7.5 million ounces in gold...which is about 10 million ounces lower than we are now. That's why I'm so alarmed at the current size of this short position that the bullion banks are holding. The question that Ted and I are wrestling with is the following..."Will this be a garden variety correction to below the 200-day moving averages...or will it be much worse? If it's just a garden variety correction, the process is well along, and we might only have 30,000 contracts [or so] left to liquidate. But if they do what they did last year at this time...God help us!

Right now, if you check the RSI [Relative Strength Indicator] on the graph below, we're fast approaching oversold on silver...and about three quarters of the way there in gold. In dollar terms, it's about $40 in gold...and in silver it could be a dollar or so. That's if we get the garden variety correction. The other kind of correction involves the lows approximating those of last November. Which will it be?

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I have four stories today. The first story from Bloomberg shows some of the ugly truths about real estate in the U.S. The fact of the matter is that it's worse than this story makes out...but at least it hints at it. Like I said since February of 2007...call me in 2013 and we'll talk about the bottom of the U.S. real estate market. The story bears the headline "Delinquencies on U.S. Home Loans Reach Record" and the link is here.

The second story is also real estate related...and also understates the scope of the problems in both residential and commercial real estate. The Reuters story is entitled "U.S. mortgage fraud 'rampant' and growing - FBI"...and the link is here.

Here's a story that's really hot off the presses at The Wall Street Journal. It's gold related...something you don't normally see in an establishment newspaper of this calibre. It's entitled "Catching The Gold Bug" and the link is here.

The last story today is also gold related. Speaking Wednesday on Judge Andrew Napolitano's "Freedom Watch" program on Fox News, U.S. Rep. Ron Paul, R-Texas, remarked that one of the purposes of his increasingly popular legislation to audit the Federal Reserve is to expose how the Fed has been manipulating the price of gold to support the dollar. His comment on gold price manipulation comes at 4 minutes and 30 seconds into the interview...and the youtube.com video is linked here.

There are none so blind as those that will not see. - Rev. Matthew Henry

That quote popped into my mind when I listened to what Ron Paul had to say. I know full well that the good Lord himself could show up at the Washington monument to Thomas Jefferson, with his Son at his side carrying two stone tablets...and announce to the world that the gold market was rigged seven ways to heaven...and there would be those who would still not believe....nail holes or no nail holes! It boggles the mind.

See you on Friday.

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