From Ed Steer:

From the close of trading in New York on Wednesday afternoon at 5:15 Eastern Time...and the close of trading 24 hours later on Thursday at the same time...the U.S. dollar lost about 90 basis points. That's a big drop. Gold's response? Up three bucks...and silver was actually down on the day.

Yesterday's low tick on the U.S. dollar occurred around 2 p.m. in New York at 79.72 cents...plus or minus a couple of ticks. Gold's peak price in the first few days of June was around $990...when the dollar printed a low of about 78.70 cents. In five weeks, the U.S. dollar has gained a full cent [one percent and change], while the US$ gold price has been hit for 77 big ones. That's a drop of 7.8%.

The point I'm making here is that this decline in the gold and silver price over the last five weeks has had nothing to do with the dollar. It has been entirely dependent on who is buying or selling contracts on the Comex...and how many. Of course large and long-term moves in the US$ make a difference...especially if you look back ten years.

But right now, the dollar has been trying mightily to rise since its low in the early days of June...and this is the best it could do...so far. In order for gold to get sold off heavily from here, we will have to see a real [or manufactured] rally in the US$. It's so much easier for 'da boyz' to hit the precious metals when the dollar is rising. This week the U.S. Treasury has been busy selling oodles of paper products [about $125 billion worth]. Eager to buy them are other central banks, not because they want them, but because if they didn't, the world's financial system would disintegrate right on the spot.

So, regardless of what the dollar does, both gold and silver could explode to the moon tomorrow if the four bullion banks that are sitting on their respective prices would either start covering their grotesque short positions, or fold their arms and do nothing...i.e. don't go short against virtually every long that's being placed...which is what they've been doing now for the last 10+ years.

The changes in open interest for Wednesday's price action [as reported by the NYMEX] were a joke. Wednesday was a huge down day in both gold and silver and there was big liquidation...but the numbers, once again, did not show any sign of that. Gold o.i. actually rose 1,058 contracts to 374,043...on monstrous volume of 145,432 contracts. Silver o.i. was also reported as being up...515 contracts to 100,891...on 26,823 contracts traded. There are only two explanations for this dichotomy...the numbers were either not reported in a timely manner, or someone is lying big time. Ted Butler figured that there were about 15,000 gold contracts and maybe 3,500 silver contracts liquidated on Wednesday. So...where are they? Hopefully they will show up in today's report when it’s released later this morning.

Today's Commitment of Traders report will be issued at 3:30 Eastern time today, and I will report on it on in my Saturday commentary. For those of you who can't wait...and want to see the report the moment it's posted...the link is here.

The Comex Delivery Report yesterday showed that 30 gold contracts and 61 silver contracts were delivered. There were no changes in the alleged holdings of either GLD or SLV...and the Comex-approved warehouses reported that a further 563,172 ounces of silver were withdrawn from their inventories.

Very little in the way of gold news yesterday. The only thing of note I could find was posted over at Kitco. It was a Reuters story filed from Johannesburg stating that gold output in May had dropped 10.5% from the same month in 2008...and total production of non-gold minerals fell 15.1%.

Today's first story is about AIG. In a piece filed at Bloomberg yesterday, an analyst at Citigroup "said the firm may have no value left for shareholders after repaying the U.S." [If that isn't the pot calling the kettle black, I don't know what is! - Ed] Then there was a washingtonpost.com story that stated that "AIG was preparing to pay millions of dollars in bonuses this month to several dozen top corporate executives." As can be imagined, AIG stock got hammered yesterday...falling 27%. The Bloomberg story is linked here.

In a Reuters story, China once again called "for reform to the reserve currency system at a meeting of world leaders in one of its most direct attacks on the dollar's global dominance." The headline reads "China demands currency reform, France backs debate"...and the link is here.

Here's a piece [courtesy of the King Report] by Ambrose Evans-Pritchard from The Telegraph in London. The headline reads "Shipping flashes early warning signals again". This short piece is definitely worth reading...and the link is here.

In the next story...a Reuters piece filed from Zurich and posted over at newsmax.com...it appears that the Swiss government is about to put its foot down and defend the secrecy of the Swiss banking system by preventing UBS from handing over client information to U.S. tax authorities..."Switzerland will use its legal authority to ensure that the bank cannot be pressured to transmit the information illegally, including if necessary by issuing an order taking effective control of the data at UBS," the Swiss government said. This story is also very much worth reading, and I thank Casey Research's Jeff Clark for bringing it to my attention. The link is here.

And lastly comes this piece posted from the GlobalEurope Anticipation Bulletin posted at leap2020.eu. The story bears the title of "Global systemic crisis in summer 2009: The cumulative impact of three rogue waves". Because this is a European website, the story is available in three other languages besides English. This story, although dated from June 17th, is also very much worth the read. I thank Brad Robertson for sending it along...and the link is here.

The foremost corporate responsibility is to serve others so well that you produce a profit. - James Cook

The G8 meeting in Italy was another non-event. I note, in looking at the chart of the Dow, that it has now broken down from its 'head and shoulders' pattern...and I see that another dollar 'rally' is in progress from its low yesterday afternoon in New York. I also note that the high in gold and silver for Friday are probably already in...their tops occurring at the close of Sydney trading in their Friday afternoon. Gold has already given back all of its magnificent three dollar gain from yesterday...and the silver price has 'dropped' like a rock now that London has opened for trading today. 'Da boyz' are back in town...and probably gunning for those 200-day moving averages. This could be an interesting day. Take two red pills and I'll see you tomorrow.

All of us at Casey's Daily Resource Plus hope you have a good weekend and we'll see you here sometime on Saturday.

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