Both gold and silver in the Far East didn’t do a thing until London opened for business on Wednesday morning.

Then both metals began a gentle rise…and then a gentle decline into the London p.m. fix. From there, both metals were away to the races. Prices continue to rise quietly in Thursday morning trading in the Far East as I write this…which is late Wednesday evening here in North America.

Open interest for Tuesday was quite interesting. Gold o.i. only rose 1,384 contracts, which is not a lot considering gold rose almost $15. There must have been short covering in there as well. Silver o.i. rose a more than substantial 2,466 contracts…no short covering there at all. These would be technically motivated funds putting on long positions, as silver is now well above it’s 50-day m.a. I wonder what entities took the short side of that trade? Whoever they were will remain unknown until the COT comes out on May 30th…next Friday.

Well, what I predicted in my commentary on Tuesday did not come to pass on Wednesday…but there’s still time for it to happen…but not a lot. Only a couple of trading days to be exact. I must admit that seeing the counter-intuitive price action in the HUI…actually going negative on the day…did nothing to allay my fears about what might happen in the very near future. This is one of the events that we at GATA have sometimes seen just before a major sell-off attempt by the boys. I don’t believe for a second that it had anything to do with the drop in the Dow, as we had a big drop on Tuesday and the HUI had a terrific day. But as I’ve said before, maybe I’m looking for a black bear in a dark room that isn’t there. Let’s see what today brings.

In other gold news on Wednesday, I see that Mr. Gartman laid on another long position in gold and will add another once gold trades above $930 in New York. Will that be today? I’ll be ecstatic if it is.

Yesterday it was the Zimbabwe dollar…such as it is. Here’s a graphic illustration of what the US$ might look like a few years down the road. Andrew Jackson would not be amused…

click to enlarge

I’m totally overwhelmed by the number of stories that are worth mentioning, but I only have room for a couple. The first story is a GATA dispatch of a speech given by Benn Steil, senior fellow and director of International Economics for the Council on Foreign Relations. The headline reads “CFR official: Gold is the world currency of the future.” The link is here.The second story is from Reuters and is entitled “Goldman, UBS and Morgan Stanley agree on dark pools.” According to the article, about 10% of all equities trading is now done in these “dark pools”. If this doesn’t sound very transparent…it isn’t…and that’s the whole idea. The article is linked here.

I see that the derivatives market expanded 44% last year (according to the BIS) and now sits at $596 Trillion dollars…that’s spelled with a ‘T’. If this pace keeps up, by this time next year, total derivatives will exceed one Quadrillion dollars…that’s spelled with a ‘Q’!!! And Moody’s says that a ‘computer error’ accidentally gave triple-A ratings to billions of dollars worth of now worthless debt products. You believe them…right?

I don’t think we’re in Kansas anymore, Toto….

See you on Friday.

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…Thursday, May 22nd, 2008