Open interest numbers for Tuesday’s take-down in both gold and silver were a bit of a surprise. Gold o.i. only fell 362 contracts and silver o.i. was down 1,429 contracts. That’s not a lot (especially for gold) considering the price damage that was done. The COT on Friday will hopefully tell us more.

I see that SLV…the silver ETF…added another 1.9 million ounces yesterday, and the silver ETF…GLD…sold off another 200,000 ounces.

Looking at the gold and silver charts, I note that the gold price is about $35 above its 200-day m.a. and silver is a little over $1 above its 200-day m.a. Can/will the ‘8 or less’ traders try to get the price down to that level so they can force more tech funds to liquidate their longs? Don’t know, but it wouldn’t take a lot of effort…which you can see by looking at the carnage we had on Tuesday. After the big price correction in May/June of 2006, the 200-day moving averages were reached in the correction of both metals. Will history repeat itself? Here’s the 3-year gold chart for your perusal. The 3-year silver chart looks identical. The link is here.

And…one more thing. June is a big delivery month for gold…and options expiry is less than two weeks away, so if the bullion banks ever wanted to do the dirty, the timing couldn’t be better. We’ll see.

Two more stories today. The first one is the report from the CFTC that the silver market is not manipulated by anyone. Their report in 2004 said the same thing. So I guess the ‘8 or less’ traders holding 79% of all the short positions in both Comex gold and silver, is not a short-side corner on the market. If not…then what percentage is? The headline reads “New Study Finds Silver Futures Market is Functioning Properly”. The link is here.

The second story is from Bloomberg. Paul Volcker has been in the news in the last couple of days. Yesterday he was speaking in front of the Joint Economic Committee in Washington and he had a few things to say that are worth noting. The headline reads “Volcker Says Fed Interventions Risk Political Battles” and the link is here.

If there is a real loss of confidence in the dollar, then I think we are in trouble. That is something that has to watched…..That has to be very much in the forefront of our thinking, without that, we are back to inflation of the 1970s…or worse. – Former Federal Chairman Paul Volcker – 14 May 2008

The news on Bloomberg and Reuters yesterday was terrible. As far as the eye can see, it’s sheer economic, financial and monetary madness out there. It’s impossible to make any sense out of anything, and I’m not going to waste any more mental energy trying to figure it out. It’s probably a good idea if you did the same…and save yourself a lot of grief.

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, May 15th, 2008