From Ed Steer:

Gold added about five bucks to its price from the time that trading began in the Far East Thursday...and the London a.m. gold fix. Then from there, it gave back seven dollars going into the p.m. gold fix...and after that, it gained over eight dollars until half past lunchtime in New York. Then a really serious seller showed up taking nine bucks off the price between then and the close of electronic trading in New York. It was pretty choppy trading all around...and it was obvious that every rally ran into serious resistance. The same could be said for silver.

But according to the usual New York gold commentator [who is not Dennis Gartman, by the way], volume in gold was heavy...estimated at 140,658 contracts..."which involved a 21.6% surge in the last half-hour. The presence of such determined buyers and sellers during the floor session is unusual."

Wednesday's open interest in gold showed an increase of 3,421 contracts to 394,360...on big volume of 120,609 contracts. Silver o.i went the other way...down 1,867 contracts to 96,402...on decent volume of 22,687. Ted said that most of the decline in silver came from far-dated spreads being lifted. I was surprised that silver o.i. fell at all, considering the fact that silver rallied 30 cents in New York trading...at the same time that gold rose nine dollars...as did its open interest. Another unsolved mystery in the dichotomy that exists in the o.i. between these two metals. Since this occurred on Wednesday, one day after the Commitment of Traders cut-off, we won't see the actual results of this until the COT on July 31st.

Speaking about the COT...the latest one comes out at 3:30 Eastern time this afternoon. Ted and I figure that the net short position in gold has deteriorated at least 20,000 contracts since the last report...and that the bullion banks are now short over 20 million ounces...again. And don't forget that of that 20 million ounces, pretty close to 14 million ounces of that short position is held by '3 or less' U.S. bullion banks.

The Comex Delivery Report showed that 66 gold and 38 silver contracts were delivered yesterday. There were no changes in the alleged gold holdings of either GLD or SLV either. There were no changes in production over at the U.S. Mint...and the Comex-approved warehouses showed a small decline in silver inventories of 117,180 ounces troy.

Before continuing further, I'd like to explain what I mean by "alleged" when I refer to the gold holdings of either the GLD or SLV. I know I've explained it before, but an e-mail that I received yesterday via Ted Butler suggests that I should do it again. Yes, I'm confident that there is gold and silver in these ETFs...but not all that they say they have. The individual prospectus on each of these ETFs is so full of holes, you could drive a Mack truck through most of them. There are no public audits, so there is no way of knowing whether all the metal they say they have, is actually there. The custodians for each do not lend confidence either. The two U.S. bullion banks with the biggest derivatives positions in the precious metals market...JPMorgan and HSBC USA...are the custodians of the silver and gold ETFs respectively. Both Ted Butler and I agree that JPMorgan is by far the biggest silver short...if not the only silver short...amongst all the U.S. bullion banks. You'll excuse me [and the rest of the GATA crowd] if we think something stinks here.

This is one of the few areas that Ted and I totally disagree on. Our conversations turn ugly whenever this subject comes up...and he calls me a lot of terrible names at times. He thinks that it would be pure fraud if the ETFs did not have all precious metals they said they did. True...but how is one to find out? And I trust these two bullion banks just about as far as I can throw them. How about you?

The ETFs are fine for speculating on the price...but to say you own gold when you own one of these [or other] ETFs is pure fiction. The ETFs short their own shares whenever they don't have the metal to back up demand. Ted and I agree that JPMorgan will rig a sell-off just so that it can buy back the shares they shorted and not have to physically deliver the metal to the SLV.

If you really want to make sure that whatever investment vehicle you buy in the precious metals arena has the physical to back it up, you have several choices...and here are a few of them...the first of which is Central Fund of Canada, James Turk's GoldMoney, Bullion Management Group, Central Gold Trust...and soon CEF will have their Silver Trust up and running. I'd bet my life savings on the fact that these firms have the metal to back up their funds that they say they do. All you have to do is phone their auditors and ask. And I'm also fortunate enough to know the principals of all these firms...most of them personally.

But before you invest a dime in any of them, just make sure that your own personal stockpile of gold and silver [in your physical possession] is big enough, before you buy any fund...even GLD and SLV if you must. I don't...and won't...own either.

The usual N.Y. gold commentator also had this to say as well..."Amongst today's buyers was apparently The Gartman Letter which cut its buy stop to $955/1 hour this morning. This will distress many of gold's friends. [Yes, it does...but as I said earlier this week, I'm praying fervently that he is correct this time. - Ed] While TGL's initial entry points for gold have a reasonable record, the history of its attempt to double up on breakouts is alarming. Perhaps TGL gets into the wrong hands! With the physical market faltering and Comex open interest and volume getting to levels seen at the late May/early June peak, this move has entered a risky phase." [It has indeed!!! - Ed]

One of things that has gold where it is...and the bullion banks pulling out all the stops to prevent its rise...is the sheer amount of paper that the U.S. Treasury has monetized...or is about to sell. It is money printing on a scale not seen since Weimar Germany after WWI.

I note in Gregory T. Weldon's latest edition of Weldon's Money Monitor that he had this to say..."The most recent data reveals a HUGE single-week [sixth largest EVER] of debt monetization by the Fed, to the tune of $36.9 billion or, at an annualized pace, that would see the Fed monetize TWO Trillion Dollars worth of debt in a 12-month period."

"Moreover, purchases were broad-based, providing the market with a GRAND-SLAM, covering all ‘four bases’ … with monetization of Treasury debt ($8.67 billion), Mortgage-Backed debt ($26.6 billion), Agency debt ($1.7 billion) and Term-Asset-Backed debt ($1.4 billion)."

And I see that Karl Denninger has gone apoplectic on this issue. Starting today, and ending next Thursday, there are $235 billion dollars in U.S. Treasuries being auctioned...almost a quarter of a Trillion dollars!!! Yep, you read that right! The article, courtesy of Craig McCarty, is entitled "Holy !@#!! Treasury Auction Schedule" and the link is here. There was a story about this in Bloomberg yesterday as well.

There should be a great smoking hole where the U.S. dollar used to be...along with a big four-digit gold price and three-digit silver price on such news...but we all know why there isn't.

Besides the Denniger piece above, I have two other today. The first I found while I was reading Bill Murphy's MIDAS commentary over at lemetropolecafe.com. It's posted at the Ottawa Citizen...and is a reprint from The Financial Post. The story is headlined "On the road to higher gold prices: 'Barometer of investor anxiety'"...and the link is here.

And lastly is this article in the Financial Times of London...written by Eckart Woertz, who is the Program Manager in Economics at the Gulf Research Centre in Dubai. Amongst other things, he recommends that..."they should engage in cautious currency diversification with gold being the ultimate dollar hedge." The link is here.

The stock market is no longer the sum product of informed, or Captains of Industry, action. It is a rigged casino and asset bubble that is used to paper over declining US living standards. - Bill King, the King Report...23 July 2009

I'm still on the fence...but every reason why the price of gold and silver should explode...or why the price should be crushed...is on display in this commentary. Rampant money printing...and a large [and growing] gold short position that is well into the danger zone. But can they...or will they? The third possibility is that the bullion banks could get totally over run. I'm not optimistic about this scenario...but like I said before, if it does happen, the party's at Ted Butler's place!

All of us at Casey's Daily Resource Plus hope you have a great weekend and I'll see you on Saturday morning.

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