From Ed Steer:

Far East trading on Friday began just the same as it did on Thursday. This time the gold and silver prices peaked during lunch time in Hong Kong...and once the silver fix was in at noon in London later in the day, the price declines really accelerated to the downside...helped along by the fact that the bullion banks pulled their bids in both gold and silver right at the Comex open...and their respective prices cratered. There was a weak attempt at a rally after the London p.m. fix [3:00 p.m. in London...10:00 a.m. in New York], but that went nowhere in either metal, and that was it for the day. The precious metals shares weren't amused, and both the HUI and XAU finished down a hair over three percent.

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Thursday's big turnaround to the upside in both gold and silver showed the following changes in open interest. Gold finished in N.Y. on Thursday up a magnificent 40 cents, if you remember...and this resulted in a decline in open interest of an insignificant 35 contracts to a total open interest of 388,339...on big volume again...122,831 contracts. Silver's price rise yesterday was somewhat more substantial, but not earth-shaking. In response, o.i. rose 1,879 contracts...which is a lot. Total silver o.i. is now 109,036...and volume on Thursday was a very large 47,428 contracts.

The Commitment of Traders report [for positions held at the close of trading on Tuesday] came out from the CFTC yesterday. It was, in a word, depressing. Despite the price decline in gold during the prior week, the bullion banks in the Commercial category only decreased their net short position by 1,474 contracts...a number hardly worth mentioning. Both Ted and I were expecting a much better reading than that. The Commercial [bullion bank] net short position in gold is now at a staggering 22.5 million ounces...almost at record levels. The link to the full-colour gold COT graph is here.

In silver, the bullion banks continue to add to their short positions. While the Non-Commercial [tech funds] and the Nonreportable [small traders] went long and covered shorts, the bullion banks added a whopping 3,976 contracts to their net short position. As of Tuesday's cut-off, the net short position in silver was 46,950 contracts...that's 234,750,000 ounces. The full-colour COT graph tells all, and the link is here.

We are [in gold] now back at extremes in the Commercial net short position not seen since before the great July massacre of 2008. We are nowhere near that bad in silver because...as Ted Butler has been keen to point out...the bullion banks have not jumped back in on the short side in a big way since silver bottomed around $9 last year...but it's still a pretty ugly net short position nevertheless. Even a cursory glance at both gold and silver COT graphs linked above, shows this as plain as day. But the bullion banks will, as they have in the past, most likely use their gargantuan gold short position to beat the living crap out of the silver price once again.

The Comex Delivery Report on Friday showed that 118 gold contracts were delivered. Silver was zero. There were no changes in either SLV or GLD...and no updates from the U.S. Mint's website. Over at the Comex-approved warehouses, silver inventories rose 115,607 ounces...ending the week at a total inventory level of 120,491,640 ounces.

In other gold news, I see in a story from BusinessIntelligence Middle East...and posted at Kitco, comes this headline..."South Africa's gold producton drops 13%". "South Africa's gold output again declined in April, dropping 13% in volume year-on-year after a 7.6% fall in March, according to official data released on Thursday. Production of non-gold minerals was down 10.3%." And buried right at the bottom of the above story is this interesting tidbit..."Meanwhile, China announced Tuesday that it produced 93.8 tonnes of gold in the first four months of the year, up 9.16 tonnes or 11.16% over the same period last year, the Ministry of Industry and Information Technology (MIIT) said on its official website." The story in its entirety is linked here.

Al Korelin of the Korelin Economics Report was kind enough to interview me for his weekend radio show. If you wish to hear what I have to say...the link is here.

Besides the previous gold news, there were lots of other precious metals-related articles on Friday, and the first one has to do with the still 'missing' gold and silver at the Royal Canadian Mint. For the moment, this story won't go away. Here's a piece on this subject from the Ottawa Citizen that's worth reading. It's entitled "Mint moves to halt possible 'run' on gold" and the link is here.

In a story in The Telegraph out of London is this headline..."Investors buy gold, as fears of inflation rise"..."Private investors are buying gold in an attempt to protect themselves against a rise in inflation, trade figures indicate." The link is here.

I had three or four kind readers send me copies of my last offering today...an interview of my very good friend John Embry, chief investment strategist at Sprott Asset Management in Toronto. It's posted over at aureport.com...is entitled "John Embry Expects $1,500 Gold and Early Stage Hyperinflation by Year End"...and is linked here.

Regarding the precious metals, there is someone...or something...that weighs heavily upon gold as it trades upward toward the $980-$1,000/oz level. That level proved to be a formidable foe again in early April and it has proven formidable once again in the course of the past two weeks. We've no interest in trading gold at this point, for like the mice in a field of elephants, properly afraid of being trampled, we are watching as forces larger that we...fight with one another. - Dennis Gartman, The Gartman Letter, 12 June 2009

A lot of people in the gold world today wonder just how much gold is really left in Fort Knox. Back in 1964 [45 years ago!] when this movie was released, no one knew...or cared. Let's see how many memories this movie theme song brings back. Turn up your speakers and click here.

In closing, here is quote from Bill King of the King Report yesterday morning..."Out-of-control derivative growth is directly responsible for the financial crisis and the almost daily manipulation of the stock market and other markets. The enormous payoff in derivatives, due to the leverage, encourages manipulation of underlying vehicles on an unfathomable scale. As usual, US regulators are asleep or allow the manipulation as part of crony capitalism. There is blatant manipulation for most expirations and daily sessions."

One would presume that it's the same group that Mr. Gartman recognized in his quote above as "someone...or something...that weighs heavily upon gold". It has a name..."The President's Working Group on Financial Markets". In a marketwatch.com story yesterday, White House National Economic Council Director Larry Summers said..."The U.S. acts in markets only when necessary and is trying to save them from their own excesses and improve them. The actions we take are those of necessity, not of choice..." As GATA's secretary treasurer Chris Powell said last year..."There are no market anymore, only interventions." Amen to that!

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.