On Friday in the Far East, the gold price wandered aimlessly until shortly after the London market opened. A rally ensued that really gathered steam shortly before New York opened for business. The peak came at the London p.m. fix…the same as Thursday. From there, it sold off a little, but gained most of it back in Globex trading in the after-market hours.

Silver was flat right up until the gold price took off just before the NY open…and both metals rose together. Silver’s advance ran into resistance a couple of times during New York trading and the top came about an hour after the London p.m. fix. From there, it was taken down 20 cents and spent the rest of the session trying to gain it back.

Volume was pretty decent on the Comex (AMEX:IAU) in New York yesterday…but the price managers are still lurking about. However, the precious metals shares soared, with the HUI up 5.01%

As expected, gold open interest on Thursday was up considerably…it rose 7,561 contracts. As has been the case more and more frequently, silver o.i. went the other way…down 1,488 contracts.

The Commitment of Traders for silver showed that the traders in the Non-Commercial category went long an additional 2,681 contracts, plus they added 1,032 contracts to their short position. The bullion banks in the Commercial category only added 47 longs, but went short a rather substantial 3,281 contracts. In gold, the Non-Commercial (tech funds) only went long 1,506 contracts and covered 417 shorts; while the bullion banks in the Commercial category went long 7,889 additional contracts…and they went short another 9,532 contracts. The numbers indicate that volume was very light during the period. With prices rising the way they’ve been doing since the Tuesday cut-off for the COT, we should expect more deterioration as the tech funds have started to come in on the long side and the bullion banks are going short against them. Same old, same old. Can the price go higher from here? Absolutely! But, as of this writing, the bullion banks are still running the price show. The link to Friday’s COT is here.

Yesterday I received a most interesting e-mail from silver analyst Ted Butler. It’s well worth the read….”GLD added the largest one-day increase in metal today, I believe, with 46 tons (almost 1.5 million ounces or $1.4 billion). An increase was expected, but not of this magnitude. Funny thing is, I think the metal deposit increase reflects yesterday’s (Thursday) high volume of 16 million shares and not today’s (Friday) enormous 25 million shares. Today’s GLD volume was the highest upside volume in my memory (there have been a few bigger volume days, but always to the downside). We’ll see if more comes in Monday. Since June 11, GLD is up 108 tons, or almost 3.5 million ounces, and over $3 billion…versus no growth in SLV. SLV had pretty big volume yesterday (Thursday) and today (Friday) and is still due much metal to come in. This (activity) seems to confirm a flight to quality buying in metals…and further, that they have the gold to deposit, but silver just ain’t available.”

In a comment in his early Friday morning report, Bill King had this to say…” A last hour 21-handle SPU rally saved the stock market on Thursday. With insolvency fears of major financial institutions running very high, and Lehman tanking to 17.30, it’s not surprising to see impact trading in the SPUs because many people have a vested interest in keeping an appearance of calm.” That probably happened on Friday in the markets as well.

It’s the weekend, and with so much happening, I’ve got three stories for you. All of them are from The Telegraph in London, and two of them are from their international business editor, Ambrose Evans-Pritchard.

The first one has to do with G. Dubya. George had an unusual way of saying his final goodbyes to his compatriots at the just-ended G8 summit in Japan. You can sure tell he’s not running for re-election. The story is linked here.

The first Ambrose Evans-Pritchard piece warns of a deflationary collapse, as the money supplies in Britain, Europe and the US, plunge. Over the past year, global deflation has overwhelmed central banks’ attempts to reflate. In the meantime, the skyrocketing prices of the necessities of life have squeezed the world’s consumer, creating political problems throughout the globe. The article is entitled “Monetarists warn of crunch across Atlantic economies”. The link is here.

The second item by Evans-Pritchard is a warning from Bill White, chief economist of the BIS. White says that “The current market turmoil is without precedent in the post-war period…and the magnitude of the problems yet to be faced could be much greater than many now perceive.” (Memo to White: Bill, you have a keen grasp of the obvious. – Ed) The article is entitled “BIS slams central banks, warns of worse crunch to come”. The link is here.

There are disturbing trends…huge imbalances, disequilibria, risks… Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot. – former Fed Chairman Paul Volcker, 2005

This weekend’s blast from the past is one of the first C&W songs to ‘cross over’ to the pop charts…a long long time ago. RIP Patsy. Click here.

Without doubt, Hank & Ben’s Guardian Angels were looking out for the equity markets yesterday…as the Dow was only below 11,000 briefly. But, in my opinion…it no longer matters. I will pick this past week as the ‘point of no return’…the crossing of the Rubicon, if you like. Now it’s a death spiral. Hyperinflation of paper financial assets no longer seems possible, as the credit contraction really starts to bite…and the smart (and big) money has begun moving to the hard asset side of the street. A deflationary implosion appears to be gaining momentum. Could this be the first sub-zero blasts of the dreaded Kondratiev Winter?

Monday should be interesting. Enjoy the rest of your weekend, and I’ll 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.

Source: And Then There’s This…Saturday, July 12th, 2008