From Ed Steer:

There was virtually nothing in the price action of gold in the Far East on Friday that suggested that there would be an explosion in the gold price on Friday morning at the Comex open. I'd gone to bed at 5:00 a.m. New York time after filing my Thursday rant that you read yesterday morning. True, at the usual 3:00 a.m. time, gold had peaked at the lofty price of $759. But two hours later the price was still at $759. So when I hit the 'On' button on the computer yesterday morning, I was hoping and praying that we would be away to the races when the Kitco gold chart came up...and we were. I'm encouraged by the fact that gold managed to finish on its highs in electronic trading after the Comex had closed for the day. The markets are very thin there...especially on Fridays...and it would have been easy for JPMorgan to have crushed the price if they'd wished to. But they didn't.

Silver had a little harder time of it, and both Ted Butler and myself were somewhat disappointed in its performance vis a vis gold. However, volume in silver yesterday was pretty light considering the run-up...so I guess I should be thankful for small mercies...and I am.

Open interest in gold on Thursday fell a largish 5,117 contracts, whereas silver's o.i. rose a smallish 194 contracts. The Commitment of Traders data published yesterday turned out to be nothing worth mentioning. I guess I shouldn't have been surprised. When you're standing at the bottom of the barrel, it just means that there are no spec longs left that the boyz can take out....and the bottom is in.

So, where to from here? I'm expecting a big run to the upside from this point. Gold closed right at its 50-day moving average and silver closed slightly below its 20-day moving average. Once these key averages are penetrated convincingly to the upside, it's almost a certainty that the technical funds (in the Non-Commercial category of the Commitment of Traders) will be in this market going long in a big way. But the $64,000 question you have to ask yourself is this one..."Will the bullion banks (JPMorgan/HSBC USA Ltd.) be there to go short against them as they always have?" That will determine how fast and how high this rally goes. If they show up, it will be the "same old, same old" garden variety rally that we've always had. But if they just fold their arms and stand aside...then the tech funds will be buying into a vacuum...and we'll have a 10/10 "reverse" waterfall to the upside that will take your breath away. Ted Butler says (and I agree) that the bullion banks have just spent four months beating the living crap out of the tech longs in all commodities...especially the money commodities...and that now that they have covered every short position that they can, they won't be back to put their heads in the lion's mouth again. We should know pretty soon what they're going to do...and the price action will tell all.

In a report at ino.com, I see that "the Italian parliament will consider a long-discussed plan to use the Bank of Italy's gold reserves to lift the country's economy...Previous attempts by European Union governments to use proceeds from central bank reserve sales to support political goals have met with resistance. Moreover, the Bank of Italy is bound by an agreement among European central banks that strongly limits its freedom to sell its gold and foreign exchange reserves." (Note to Finance Minister Giulio Tremonti: Call Beijing...they'll cut you a cheque so fast it will make your head spin...and not one ounce of that gold would ever hit the markets. - Ed)

In other news...Warsaw (Reuters) "Poland's financial and securities regulator KNF said on Friday it had filed a complaint with local prosecutors accusing a ‘person acting in the name of JP Morgan Securities’ of possible market manipulation...A spokesman in London for JP Morgan Securities, a unit of JPMorgan Chase, declined to comment." (Guilty as charged, would be my bet. - Ed). New York (Reuters) "Citigroup Inc. will probably get rescued by the U.S. government after a crisis in confidence erased half its stock market value in three days...Citigroup has more than $2 Trillion in assets, dwarfing companies such as AIG." (But its market cap at the close of trading on Friday was $21 billion. One wonders what these "assets" are really worth...tee hee! - Ed)

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Two stories today. The first was posted at Kitco yesterday morning. It proves beyond a shadow of a doubt that the demand for physical bullion by the public is not only world wide...but now well beyond the capabilities of all the world's mints to satisfy. It's the result of finite refining and production capacity on one hand...and a finite amount of good delivery bars to supply that demand on the other. The story...posted at theaustralian.news.com.au...is entitled, "Perth Mint suspends orders amid rush to buy bullion" and the link is here.

The second story is a sixteen page monster that will keep you off the streets for a bit. It's in (of all places) the December issue of Vanity Fair. The author (who writes under the pen name Niall Ferguson) is Laurence A. Tisch, Professor of History at Harvard University and a Senior Fellow of the Hoover Institution at Stanford, and the author of The War of the World: Twentieth-Century Conflict and the Descent of the West. The essay is entitled "Politics & Power: Wall Street Lays Another Egg"...and the link is here.

A man in the audience who identified himself as a Comex gold trader asked how he could protect himself against U.S. government intervention to obstruct delivery of gold due on the December contract. I replied that unfortunately the only defense against such lawlessness by the government might be the Second Amendment. - Chris Powell, Secretary Treasurer, gata.org

Today's 'blast from the past' is another one from the 70s. I can't believe I actually had a 'hair do' like that way back then. I looked ridiculous. Those were the days...sigh! Turn up your speakers and click here.

At precisely 3:00 p.m. Eastern time, some mysterious entity (probably Hank and the President's Working Group) starting buying S&P futures by the bucket full. The short covering rally that followed was a sight to behold. If you think for one second that what happened in the last hour of trading was free markets in action...I've got a bridge I can sell you!

See you on Tuesday

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