Neither silver nor gold saw much price activity until trading in Europe was well underway on the LBMA. Then about 6 a.m. New York time, both metals moved higher right through the Comex open. But less than two hours later, that party came to an end as both metals got sold off hard going into the close of regular trading in NY. Gold and silver managed to close higher on the day, but not with much enthusiasm.

It was options expiry in the over-the-counter market yesterday, and I guess the bullion banks didn’t want another big chunk of options that they had written to expire in the money, because if they had, they would have lost all that lovely commission. Although there was (obviously) intervention in the bullion markets today…like Wednesday, there wasn’t a lot of volume, so it was easy for anyone to push this market higher or lower…and someone obviously did.

With gold imports in India still off the charts, the regular NY commentator had the following, rather longish, commentary yesterday…”Reuters today carried another story referring to retail bullion demand being active. John Reade, the UBS gold commentator, apparently the only institutional observer to report systematically on the physical market, shifted to bullish today in large part because of the recent physical experience: ‘…over the past three weeks we have noted unprecedented physical gold demand from India, some European consumers and other Asian clients. Demand is also very strong from Turkey and the Middle East and should pick up from Italy next week after the vacation…The last time we issued a strong tactical buy recommendation in gold was in August 2007 at $660/oz. Gold eventually topped out more than $350/oz higher than that level, demonstrating the potential for the metal when these three factors align.’

“Yesterday’s (Wednesday) Comex experience was more or less a continuous erosion of substantial overnight gains. The +$5.90 day saw open interest rise 4,631 contracts, or 14.4 tonnes. Apparently fresh selling came forward to meet demand.

“Today’s (Thursday) overnight gains seemed to trigger a buying panic in NY, which opened up $10 and added another $5 in the first half hour. The metal was then stopped cold by massive selling – an estimated 33,000 contracts were traded between 9 and 10 am – and then forced down.

“What several observers pointed to as a ‘barrier’ around $837 spot is being resolutely defended. However, an attempt to force gold into negative territory was overcome and the Comex floor session closed up $3.20 (having been up another $12.20 at one point).

“The crucial debate as to the extent of Official intervention in markets took two steps forward today. Nikkei News, which sometimes breaks main stream media ranks, published a detailed account of official plotting to manage the dollar at the time of the Bear Stearns demise. The story is here.

“This resulted in The Gartman Letter (which can sometimes be seen as the Financial aristocracy’s herald to the peasantry) to do a good deal of trumpeting to the effect that the obvious implication for gold was unreasonable. Secondly, the statement by the IEA that it would sponsor oil stock pile releases in the event of hurricane disruption needs to be seen for what it is: a deliberate attempt to influence prices. That is a long way from ensuring supplies in the event of actual disaster. In effect, Officialdom intervened to protect one class of operator from what could have been a nasty couple of days, to the disadvantage of another, arguably (the) more prudent class.

“None of this will be of any interest to the Indians. Gold shorts must be wondering if they will be similarly protected over the long weekend…and on the basis of today’s action…they will.”

I see in a Bloomberg story yesterday that…”Rand Refinery Ltd., the world’s largest gold refinery, ran out of South African Krugerrands after an ‘unusually large’ order from a buyer in Switzerland. The order was for 5,000 ounces and it will take until September 3rd for inventories to be replenished.”

Two more stories today…both out of British newspapers…and both about Russia. The first one, from The Times of London, is about the ongoing adventures they’re having in Georgia and is headlined “Cold War tension rises as Putin talks of Black Sea confrontation”. It’s well worth the read and the link is here.

The second story, if true, has far more political and economic ramifications than the first one. It’s from Ambrose Evans-Pritchard from The Telegraph in London and bears the astonishing title “Russia may cut off oil flow to the West”. Needless to say, it’s a ‘must read’. The link is here.

Today is the last trading day of August…and of summer. I’m not expecting much to happen, and if it does, it will be on little volume. Everyone’s mind (including yours truly) is thinking about the long weekend ahead…and that’s exactly what you should be thinking about too.

Have a great long weekend…and all of us at Casey’s Daily Resource Plus will see you here 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.

Source: And Then There’s This…Friday, August 29th, 2008