I wrote in my closing comments in my Friday column that gold had just moved above $1,280 spot and silver above $21 spot in early London trading, not realizing at the time that I was looking at the highs of the day in both metals.

About an hour after London opened, the gold price began to decline from its high of around $1,282.50 spot... and, despite a couple of rally attempts, got sold off right into the London p.m. gold fix at 10:00 a.m. Eastern time in New York. From that low... $1,271.10 spot... gold made a minor recovery before being sold off to close down 80 cents from its Thursday closing price.

Silver's high price [a hair over $21.00 spot] was set shortly before London opened for trading... and then began to decline at the same time as the gold price headed south. Silver's low of the day [$20.60 spot] occurred at the London p.m. gold fix as well... at precisely 10:00 a.m. Eastern time. Silver recovered about two bits during the subsequent rally but, like gold, got sold off to close below its Thursday close.

I believe that the chart patterns in both gold and silver yesterday were what technicians call a key reversal to the downside. If the bullion banks were out to paint the charts on Friday, they did a good job. We'll have to wait until Monday's trading activity to see if this technical pattern bears itself out.

The world's reserve currency began Friday trading in the Far East by climbing as high as 81.34 on the dollar index before falling all the way down to 80.86 over a seven hour period, with the bottom coming at 9:00 a.m. in London. From that low, the U.S. dollar came roaring back and finished the day at 81.40 on the U.S. dollar index... hitting its high of the day [81.52] about 10:30 a.m. Eastern time... 30 minutes after the London p.m. gold fix. For a change, this fall and rise in the dollar coincided neatly with what happened to the gold and silver prices. So maybe this technical stuff in the previous paragraph means nothing.

The HUI fell right along with the gold and silver prices, but recovered a bit the moment that the London p.m. gold 'fix' was in at 10:00 a.m. However, with the continuing weakness in the gold and silver prices after the subsequent rallies off their respective lows, the stocks rolled over... and the HUI finished virtually on its low of the day with a loss of 1.15%. I enjoyed that one day when the HUI closed over 500... and I hope we don't have to wait too long before we're above it again... and this time leave it far behind. Here's the 5-day chart for the week that was.

Friday's CME Delivery Report showed that 75 gold and 100 silver Comex contracts were posted for delivery on Tuesday. Both JPMorgan and the Bank of Nova Scotia were trading for their proprietary accounts again yesterday. Despite what JPMorgan et al have said in public, one has to wonder how much longer these firms will continue this practice. The link to that action is here.

Both the GLD and SLV ETFs had something to say for themselves yesterday. GLD reported receiving 195,439 troy ounces of gold... and the SLV added a chunky 1,223,100 ounces of silver. There was no sales report from the U.S. Mint... and the Comex-approved depositories had a net inflow of 834,511 ounces of silver on Thursday. The link to that action is here.

As far as yesterday's Commitment of Traders report went, there was further deterioration in the bullion banks' short positions in both silver and gold. But, as Ted Butler said on the phone yesterday... it could have been worse.

For positions held at the close of trading on Tuesday, September 14th... the bullion banks increased their net short position in silver by a further 3,263 contracts... or 16.3 million ounces. The Commercial net short position now sits at an eye-watering 65,061 contracts, or 325.3 million ounces of silver. The '4 or less' bullion banks are short 258.5 million ounces... while the '8 or less' bullion banks [which includes the '4 or less' bullion banks] are short an obscene 342.4 million ounces of silver... six months of world silver production.

Here's the full-colour COT chart for silver. You can see how extreme the overbought condition is if you compare it to each report going back the full twelve months, as this is the biggest net short position that the bullion banks have had during the last year. How will it end? The link is here... and it's worth spending some time on.

In gold, the bullion banks only increased their net short position by 5,259 contracts, which isn't a lot in the grand scheme of things. The Commercial net short position in gold now sits at 29.3 million ounces. As of Tuesday's cut-off, the '4 or less' bullion banks were short 21.0 million ounces of that amount... and the '8 or less' bullion banks were short 28.6 million ounces.

Here's the full-colour COT graph for gold for the last twelve months... and it's almost [but not quite] in the same boat as silver. The link is here.

The other thing that Ted Butler and I discussed was the little matter of how much of Tuesday's big up day in both metals actually made into yesterday's COT report. My guess is that one of the reasons that the report may not have been as bad as Ted was expecting, was because not all of Tuesday's data was reported. However, by the time next Friday's report comes out, whatever happened this past Tuesday will be lost in the crowd. This is one of the reasons why the bullion banks pull this little stunt, because they don't want prying eyes to see the truth at a point in time like that.

Here's Ted Butler's updated "Days of Production to cover Short Contracts" graph courtesy of Nick Laird over at sharelynx.com. As the bullion banks pile on the short positions in both gold and silver... those green and red bars just keep getting longer and longer.

¤ Critical Reads

Property Developer: The ECB Is The Only Thing Stopping Spain From Becoming The Next Dubai

My first offering of the day comes from reader Charles who lives in Gibraltar of all places. This is a story from Wednesday's edition of the Business Insider. It bears the headline "Property Developer: The ECB Is The Only Thing Stopping Spain From Becoming The Next Dubai". The first paragraph of the story pretty much sums it up... "The desperate state of Spain's property market is well known, but what isn't... is the extent to which it has yet to fall, and how much it might impact banks holding property loans on their balance sheets." This story is very much worth your time... and the link is here.

Ireland IMF bail-out rumours spook markets

The next article is courtesy of Roy Stephens. It was a story that filed in last night's edition of The Telegraph out of London. The headline is a bit of a surprise... and it reads "Ireland IMF bail-out rumours spook markets". Credit default swap rates soared on a piece of research by Barclays Capital warning of a potential rescue package. A combination of costly bank bail-outs, anemic growth and one of the worst budget deficits in the European Union have stoked fears of a full-blown debt crisis in Ireland. This story is also worth the read... and the link is here.

Central Banks Dump $57 Billion Of US Agency Debt

There was a very interesting commentary posted over at Jim Sinclair's website... jsmineset.com on Thursday. The headline reads "Central Banks Dump $57 Billion Of US Agency Debt". Dan Norcini devotes three or four paragraphs of text to this event... and posts a couple of nifty charts as well. It will take you less than two minutes to run through this... and it's definitely worth your while. The link is here.

Third World America: the decline of a superpower

Next, dear reader, is one of your two big reads of the day... this one is courtesy of reader U.D. The essay is from the September 14th edition of Maclean's magazine here in Canada. The headline is just downright depressing... and, as a Canadian, I never thought I'd live to see the day when I'd see an article like this in a Canadian publication... but here it is. It reads "Third World America: the decline of a superpower". It's sad, sad, sad... and the link is here.

Congressmen Weiner and Waxman Set Gold Hearing

My next four offerings are all gold related in one form or another. The first is a rather disquieting story that was sent to me by a couple of readers yesterday... but the first person through the door with it was Dennis Miller. It's a post over at the seekingalpha.com website that's headlined "Congressmen Weiner and Waxman Set Gold Hearing". The hearings, set for September 23rd, will focus on "legislation that would regulate gold-selling companies, an industry whose relentless advertising is now [a] staple of cable television." As the author of this piece states, the hearings "should be quite a show."... and the link to this short must read piece is here.

Mine nationalization seen failing at South African party meeting

This Reuters piece filed from Johannesburg on Friday morning showed up as a GATA release yesterday afternoon. The GATA headline reads "Mine nationalization seen failing at South African party meeting". Leaders of the ruling African National Congress are unlikely to bow to pressure from unions and within the party by agreeing to nationalise South Africa's mines during a policy review conference next week. This is a must read story as well... and the link is here.

Thailand increases gold holdings by 20%

The next gold-related story is a GATA release headlined "Thailand increases gold holdings by 20%". Thailand increased its gold holdings to 3.2 million ounces in July from 2.7 million ounces in June, according to financial data published by the International Monetary Fund. The rest of the story is worth reading as well... and the link is here.

Richard Russell - "There's No Fever Like Gold Fever

My last gold-related story is a blog posted over at King World News that's headlined "Richard Russell - "There's No Fever Like Gold Fever". Anything that Richard Russell has to say about gold is well worth reading... and the link is here.

Eric Sprott... Chairman and Chief Executive Officer & Portfolio Manager of Sprott Asset Management

Eric King also has another new interview posted on his website. This one is with Eric Sprott... Chairman and Chief Executive Officer & Portfolio Manager of Sprott Asset Management in Toronto. His gold fund just purchased 6 tonnes of gold yesterday... and that was the headline story of my Friday column. Any time that Eric is talking... you should be listening. This is a must listen from one end to the other... and the link is here.

When Japan Collapses

My last big read of this column was sent to me by reader U.D. earlier this week... and I waited until Saturday to post it, so you would [hopefully] have the time to give it the attention it deserves. It's posted over at theburningplatform.com website... and the headline reads "When Japan Collapses". As writer John Mauldin so eloquently stated... "Japan is a bug in search of a windshield". There's not a thing in here I disagree with... and even though its on the long side... it's an absolute must read... and the link is here.

The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. - Thomas Jefferson

Today's 'blast from the past' was written in 1899... and subsequently revised in 1900. The piece is entitled Finlandia, Op.26. It's a symphonic tone poem for orchestra by Finnish composer Jean Sibelius. Here is the Finnish Radio Symphony Orchestra playing in Tokyo on October 22, 2005. Sakari Oramo conducts. It's a wonderful piece, so turn up your speakers and click here.

Well, there were new highs set in both gold and silver on Friday, but I must admit that I take cold comfort from that at the moment. If you looked at the full-colour COT graphs, the short positions of the bullion banks [especially in silver] are at twelve month highs. Can we continue higher from here... regardless of that? Sure, but every long contract placed will have a bullion bank on the short side of it. And unless they get over run at his particular juncture, this rally will probably end up the same as the rest of them.

But, having said that, this is still a precious metals market that wants to go higher despite what JPMorgan et al are doing. The world... and it's economic, financial and monetary systems are all going to hell in a hand basket. The stories I ran both yesterday and today in this column are living breathing proof of that. The only safe investment these days is physical precious metals in hand...and the stocks of the companies that dig them out of the ground.

Despite any correction we may have, I'm still all in... and prepared to wait these bastards out as long as it takes.

I see that Thailand has now joined the parade of world central banks that are turning paper into gold. On Monday, which is the 20th of the month, The Central Bank of the Russian Federation updates their website for the month of August. I will be eagerly awaiting to see how much paper that the Russians have turned into physical gold during that month... and I'll report it [along with the usual graph] in my Tuesday commentary.

I would also suggest, dear reader, that you go out and turn some paper into gold [and silver] as well. If it's good enough for the world's central banks at this point, then it's certainly good enough for us.

As I said in this column yesterday, with the precious metals shares poised to blast off to new highs in the very near future, I would deem it prudent to be as fully invested as you wish to be... starting right now. I'm still urging you to put your investment dollars to work. The first place I'd start would be with a subscription to either Casey's Gold and Resource Report... or Casey Research's flagship publication... the International Speculator. Please click on the links, as it costs nothing to check them out... and the subscriptions come complete with CR's usual money-back guarantee.

In closing I'd like to thank all of you who were kind enough to send in the 'beefs and bouquets' regarding the new format. One comment in particular I'd like to address in this column came from reader "Dr. Strangelove" who did not leave a return e-mail address. His comment went like this: "Nice updates... but... Ed's picture should be updated to show that he's aged." Well, doctor, I hate to break it to you, but that picture is less than a year old... and I haven't changed much since, even though I'll be 62 years young on my next birthday... which is only two weeks away. Here's a more recent photo that was taken five months later while I was speaking at the Vancouver Resource Conference in January of this year. I don't know if I look older in this photo or not. I posted this just after the conference was over... but here it is one more time.

Enjoy what's left of your weekend... and I'll see you on Monday.