From Ed Steer:

Both gold and silver were comatose all night long in the Far East...and all through European trading once again. However, the moment that the London p.m. fix was in, both metals' prices went vertical. Silver got capped before it hit $13...but gold managed to close above $900, and is now above $910 as I write this. As I said yesterday...Friday is options expiry...so be ready for anything. But even I wasn't expecting that. Today's New York price action should be enlightening.

Needless to say, Ted Butler and I had a discussion about yesterday's goings-on. His guess [and it's only a guess] is that the 'four or less' traders in the Commercial category of the Commitment of Traders...all bullion banks...have covered all the shorts they can by rigging the price to the downside...and now they're forced to cover their shorts in silver and gold by buying in the open market. This action on their part, if true, would have caused the spike up in prices yesterday. Time will tell.

Surprisingly, since both gold and silver prices rose on Wednesday, open interest in both metals fell...but as I mentioned yesterday...we're in the rollover period before options expiry and first day notice for May, and a lot of switching is going on...and many contracts are also being closed out. Having said all that, gold open interest fell 2,824 contracts to 336,402...and silver o.i. was down 534 contracts to 95,743.

Not a lot to report in 'other gold news' this time. The Comex Delivery Report on Thursday showed that 49 contracts were delivered in gold...and two in silver. Not a lot of activity there. Over at the Comex-approved warehouses, I note that 477,032 ounces of silver was removed from the exchange yesterday. Virtually all of it came from Brink's, Inc. Over at the GLD ETF, about 30,000 ounces was removed...probably a fee payment. There was no change in SLV.

I have four stories today...three of which are on the same topic. The first one is about Fannie Mae and Freddie Mac. With the subprime debacle swept under the rug for the time being...another great hairy mortgage creature has come shambling forth to take its place. These are option ARMS...which are just as bad, if not worse than subprime. The main difference being that there are three years worth that have to be ploughed through...unlike subprime which was over in 18 months. This is the second residential real estate shoe to drop...and this one will be the killer...and it's starting now! Here's the graph that tells all.

click to enlarge

And here's the story that I mentioned above. You can refer to this graph as you read the commentary. Better yet...save this chart on your own computer for future reference. The story, which is posted at globaleconomicanalysis.blogspot.com, is entitled "Fannie Freddie Delinquencies Soar [and they are going to get much worse]". I thank Casey Research's own John Grandits for this article. The link is here.

In a Wall Street Journal story that I 'borrowed' from lemetropolecafe.com comes this real can of worms..."BofA CEO says was told to be quiet on Merrill"...It appears that "Bank of America Chief Executive Kenneth Lewis told the New York attorney general he believed former Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke wanted him to keep quiet about the worsening terms of the bank's acquisition of Merrill Lynch, according to testimony reviewed by The Wall Street Journal." This is going to get ugly. The link is here.

The next 'borrowed' story is "the smoking gun"...the 5-page letter from N.Y. Attorney General Andrew Cuomo to Christopher Dodd and Barney Frank et al. "'Dave from Denver", a regular commentator over at lemetropolecafe.com, had this to say about the unfolding debacle..."This is a picture postcard example of what happens when rats are trapped in a corner...they turn on each other." The link is here.

And lastly...and thanks once again to lemetropolecafe.com...is this piece on the same issue. It's posted at businessinsider.com. When the lawsuits start flying on this one...Hank Paulson and Ben Bernanke will most certainly be amongst the accused. The commentary is entitled "Paulson Contradicts Bernanke, Blames Bernanke for Lewis Threat". This will be a pissing match for the record books...but will anybody go to jail? The link is here.

Well...let's make it five stories today. This last one is from Ambrose Evans-Pritchard at The Telegraph in London. It appears that Germany's leading institutes forecast a 6% contraction of GDP in 2009...a slump reminiscent of 1931..." It should be no surprise to you, dear reader, that the world's economy is collapsing in ruins. The story is entitled "Germany's slump risks 'explosive' mood as second banking crisis looms"...and I thank the 'Charleston Voice' for bringing it to my attention. The link is here.

Most people still do not understand that the current crisis is not about saving capitalism; it’s about saving the welfare state-crony capitalist-fascist political economy in the US that can no longer pay its bills. - Bill King, the King Report

Today is Friday...and it's Comex option expiry for both gold and silver. And as we watch the world going to hell in a handbasket...it will be another interesting trading day...to say the least.

All of us at Casey's Daily Resource Plus thank you for reading our comments here this week...and we look forward to seeing you on Saturday.

Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.