From Ed Steer:

Gold was up a dollar and silver was up a penny or so, when I went to bed [at a decent hour for a change] on Sunday night. I was delighted to find gold at its high of the day [$955] when I got up...which was shortly before the London p.m. gold fix. Of course that didn't last long, but gold [and silver] both had a pretty good time of it nonetheless...and it's been a while [a long while, actually] since gold has been up any significant amount on a Monday. Of course the dollar was down a bit...and all commentators pointed to that...but I'm sure there was more to it than that...as the dollar's move during Monday was pretty inconsequential...but maybe someone knows that bigger declines are forthcoming.

The silver price was up...but it didn't have a lot of conviction behind it, and its high of the day was shortly after the London a.m. gold fix. Since then, it's been trading between 5-10 cents lower in price. Unlike gold, silver has not broken through its 50-day moving average on the up side. Once [if] that happens, then I expect silver to show a lot more strength as the technical funds show up on the buy side once again.

The shares did well for themselves...closing almost on their highs of the day.

Although I'm delighted with yesterday's action, my enthusiasm is tempered by the fact that it's the 'same old, same old routine'...with the bullion banks taking the short side of nearly every long position that's placed. So unless things are really different this time, it will end the same way...once we are oversold in both metals, the bullion banks will pull the lever again...just like they did during the first week of June.

But the change in position limits that the CFTC has been shouting from the rooftops about for the last number of weeks is also a factor to be seriously considered in the grand scheme of things. If the CFTC is serious about setting the silver situation right, then there are big changes coming that will be hugely positive for both the silver and gold price...and, as Ted Butler says in an interview linked further down, the Commitment of Traders report will begin to take a back seat to these CFTC-driven events. I sure hope so.

Friday's open interest numbers were exactly as expected. As I mentioned on Saturday, Friday's huge spike in silver and gold prices...beginning at the Comex open in New York...was probably a short-covering rally from beginning to end...and the numbers indicate that. In gold, o.i. declined 2,570 contracts to 280,537...on decent volume of 79,104 contracts. Silver's almost 40 cent rise in price was accompanied by a 1,112 contract drop in open interest down to 98,632...on volume of 17,125 contracts. Unfortunately, Monday's action in both metals will have negated most of that improvement...and I'll find out when the o.i. numbers are published later this morning.

There sure wasn't a lot of activity shown in the Comex Delivery Report yesterday morning. Only 35 gold and 3 silver contracts were delivered on Monday. Neither the GLD nor SLV showed any changes...but last week over at the Zürcher Kantonalbank in Switzerland, they reported that a smallish 4,993 ounces were added to their gold ETF. But their silver ETF added a whopping 683,975 ounces. That's a lot!...and I thank Carl Loeb, as always, for this update. Ted Butler and I discussed these numbers yesterday. We've both noticed that despite the poor showing for the ZKB gold ETF at times [the number above being a perfect example] silver has never had a poor weekly showing...ever. With no exceptions, it's always been a really decent six figure number...with the number above being the largest that I can remember. Is someone accumulating a large position for themselves...as this level of buying is starting to stick out like the proverbial sore thumb As of last Friday, the ZKB silver ETF had 50,414,862 ounces stashed away...all of it the real McCoy!

I figured that the U.S. Mint would have taken a break and not reported anything for Monday...but they did...even though it wasn't a lot. They increased their silver eagle production by another 75,000...bringing their monthly total to 1,875,000. And over at the Comex-approved warehouses, Monday's update of their Friday closing inventory shows that 583,576 ounces of silver were added.

I also note that The Central Bank of the Russian Federation has finally updated its website for the month of June. During that month, the bank added another 300,000 ounces of gold to their reserves, which now total 17.7 million 'fine troy ounces' as the line item puts it. I bet they paid for it in U.S. dollars as well. The Russian central bank has added 700,000 ounces to its reserves since January 1, 2009. I often wonder if Putin and Medvedev are sitting on more bullion than they say they have? It wouldn't surprise me in the slightest if they were.

The usual New York gold commentator reported yesterday that..."By no means all of gold's friends will be pleased that Dennis Gartman [who publishes The Gartman Letter about the same time as I fire my rant off to my editor]...abruptly went long gold after a couple of weeks of negative remarks. To be fair, this fits with TGL's rapidly worsening view of the impact of the Obama administration, particularly on the dollar. But the suddenness of the turnaround [and the appearance of an exceedingly rare positive article on gold on Bloomberg] raises the possibility that there is a western speculative effort to run gold up."

"The comparatively soft footing in the physical market, and the solid resistance found on the Comex today suggests this effort is too early in the summer to achieve anything really substantial."

The Gartman Letter has a particularly poor track record when it comes to calling anything even close to tops or bottoms in the gold price. It's a long-standing joke with us at GATA that the moment that Dennis wants to short the market...it's about that time the average investor should be going "all in”. And whenever he goes long, it's always the 'kiss of death' for the gold price...as he normally gets stopped out within 48 hours. So it was no surprise to me that I got an e-mail from GATA's secretary treasurer, Chris Powell, yesterday stating..."Sell!!! Go short! Get rid of your coins, fast! Gartman is buying gold again." But I never forgot the fact that a stopped clock is always right twice a day...and I must admit that I said a silent prayer hoping that this time he's called it right. We're all cheering you on, Dennis!

And later on in the day, the usual N.Y. commentator also passed along this tidbit from the desk of ScotiaMocatta..."'Gold price action is bullish having finally taken out our critical 943 resistance, moving to current 950. The 943 area had held on 9 separate days since breaking down lower on June 12. Now that we are above this level, we believe that it will act as strong support on any pull back. The next topside resistance is seen at 23.6% Fibo at 960 followed by June high 990.' This is especially important if the move is predominantly a western spec exercise."

I note in a comment by 'Dave from Denver' over at lemetropolecafe.com that JPMorgan is holding a board meeting in Washington and that Rahm Emmanuel, Obama's chief of staff will attend. You have to ask yourself what that's all about. Four more banks, one in Georgia, one in South Dakota...and two in California, were closed by the FDIC on Friday. Then there was this WSJ story that the city of Philadelphia "has stopped paying its vendors and suppliers, citing a cash crisis." I see [thanks to Craig McCarty] in a Bloomberg story, that Neil Barofsky, the special inspector general for the Treasury's TARP [Troubled Asset Relief Program] says that the U.S. rescue may reach $23.7 Trillion to bolster the economy and bail out financial companies. The link is here.

Below is a graph showing the goings-on in the Commercial Paper [CP] market. The Commercial Paper market is essentially a private debt market used by corporations as a cheaper means of funding typical recurring operations...rather than drawing on a line of bank credit. Commercial paper, as a financial instrument, is by no means a recent innovation...and as of the latest published period, commercial paper outstanding is contracting at the fastest rate on record, registering a whopping 37.33% decline year-over-year. Another important insight, at $1.097 trillion, the total CP market is now 13.75% smaller than the $1.272 trillion seen at the bottom of the last contraction in late 2003. The CP market that expanded wildly throughout 2004, 2005, 2006 and most of 2007 is now no more, replaced instead by one smaller and contracting faster than at any other time in this century.

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I have an assortment of stories today. The first is actually an interview done by Newsmax TV's Dan Mangru with global investor Marc Faber. It deals with the second stimulus, inflation, cap and trade, deficits, real estate, and the Federal Reserve. The link is here.

The next story is from The Telegraph in London. Ambrose Evans-Pritchard has another startling piece that's entitled "Fiscal ruin of the Western world beckons"..."For a glimpse of what awaits Britain, Europe, and America...as budget deficits spiral to war-time levels...look at what's happening to the Irish welfare state." In a word...it's ugly. This story is well worth the read...and the link is here.

Over at marketwatch.com Peter Brimelow has an article that covers a lot of Goldman Sachs territory in a very short column...as there are lots of links to be followed. Ever since Matt Taibbi's Rolling Stone article "The Great American Bubble Machine" where he describes GS as a "giant vampire squid with its face wrapped around the face of humanity"...the heat has been on. Brimelow's article is entitled "Is grousing about Goldman reaching critical mass?"...and the link is here.

The next story is on the longish side. It appeared in thenation.com magazine on July 15th. Author G. Edward Griffin calls it "The Creature From Jekyll Island"...and the author of this report, William Greider, calls it "Dismantling the Temple". Both men are referring to the Federal Reserve...which is a private company...like IBM or Caterpillar. We all know that Ron Paul is trying to get an audit of this private company. The essay is linked here.

And lastly...if you can stand it...I have a Ted Butler double header. The first is a question and answer session that Butler did with Scott Smith over at Swiss website thedailybell.com. The link is here. The second is an audio interview that Ted did with Eric King over at King World News...and the link is here. Both are worth your time.

In Nazi Germany there is no field of business activity in which the State does not interfere. In more or less detailed form, it prescribes how the businessman may use capital which is still presumably his private property. And because of this, the German businessman has become a fatalist; he does not believe that the new rules will work out well, yet he knows that he cannot alter the course of events. He has been made the tool of a gigantic machine which he cannot direct. - Günter Reimann, The Vampire Economy...1939

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Above is the 3-year U.S. dollar chart...and it doesn't look pretty. Of course, with all that's going on in the silver and gold world, the prices of both metals could move much higher [or much lower] and have the dollar do nothing. But there are times when watching the greenback makes perfect sense...and this is one of them. Unless the Fed and/or the BIS intervene in a massive way, the dollar looks like it’s headed down…big time. If that happens, the 'summer doldrums' in the precious metals could disappear in a flash. We'll see.

Until tomorrow...

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