Silver was comatose all night long, but showed the same signs of life just before the Comex opened. From there, it rose about 30 cents and sat at about $16.85 for the next ten hours, when it too started into a gentle decline at the beginning of Hong Kong trading this a.m.

Considering that the US$ fell about forty basis points and oil tacked on over five bucks…and a lot of the grains were limit up…and the CRB set a new high…this precious metals action was underwhelming to say the least. I wasn’t impressed with the ‘performance’ of the gold indexes either.

As far as Tuesday’s open interest goes, there was a strange dichotomy once again. Gold o.i. declined 7,317 contracts…and silver went the other way…up 2,134 contracts. The gold o.i. number makes sense because of the $27 drop in the price, but unless someone went massively short silver on Tuesday, it makes no sense that silver o.i. went up instead of down. Tuesday was the cut-off day for the Commitment of Traders report…which comes out tomorrow. These numbers should be there, but I’ll be amazed if they are.

There has been a lot of talk in the last month or so about Lehman Brothers. You have to wonder if we will have another Bear Stearns or Enron-type scenario on our hands in the near future. Below is the link to the 3-year KBW Regional Banking Index (KRX). It will be interesting to see if the Fed and the President’s Working Group can save them (and LEH) this time…like they tried to several times in the last eighteen months. The link to the graph is here.

My first offering today is from marketwatch.com and is entitled “How gold will perform in a U.S. recession”. I’m surprised to see a positive story on investment demand coming from someone at the World Gold Council, as they normally only champion the cause of jewelry. The link is here.

This next item is the second story in a week from The Wall Street Journal commenting that a return to the gold standard might be worth considering. This is the fifth gold story in as many weeks on this topic…two from the Council on Foreign Relations, one from the Asia Times…and now two in a row from the WSJ. Does it mean anything? Don’t know for sure…but I’ll have my eyes wide open for any more stories like these. The commentary is entitled “The Weak-Dollar Threat to World Order” and is certainly worth reading…and is linked here.

The hottest places in hell are reserved for those who remain neutral in time of great moral crisis. – Dante Alighieri (1265-1321)

I see that Fed Vice-Chairman Donald Kohn said that it might be good idea to let inflation run amok for a while. (Note to Donald: what the hell do you think has been happening for the last 25 years?). The Dow was finally allowed to decline a little. But what it really wants to do is die…however, the ‘powers that be’ just won’t let it. It’s wall-to-wall ugly out there, so keep your head up and your stick on the ice.

I hope your Thursday goes well…and I’ll see you tomorrow.

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, June 12th, 2008