The folks at Casey Research summed up what's going on with precious metals by the end of last week:

"After a week of unrelenting bloodshed, the precious metals got some relief at the end of trading as the almighty (lately, anyway) dollar finally yielded some of the ground it had recently gobbled up.

The metals were also helped by a recovery in the crude price after it dipped briefly below the psychologically-important $100 mark.

It seems likely that there was also a spate of short covering after the massive long liquidation of the previous nine days. But to find out how that compared with buyers seeing opportunity in the price drop, we’ll have to wait until next week.

Sentiment could be shifting, as the big selloff has probably created some pent-up demand that needs only a little nudging to take over. That came yesterday in the form of dollar weakness, which served as catalyst for releasing some of the pressure.

“Gold prices might already be trading at oversold levels,” wrote Tobias Merath, head of commodity research at Credit Suisse. “Fundamentals still speak in favor of a recovery to $900 or slightly higher in the next few months.”

The ETF market remains strong. There here has been only marginal liquidation of gold ETF holdings, about 1 million ounces over the past five weeks, according to Jeffrey Christian of the CPM Group."

It was interesting to me that The Central Fund of Canada (AMEX:CEF), which is split about 50/50 in its holdings of gold and silver, was up an impressive 8.5% Friday while the gold ETF (NYSE:GLD) rose only 3.4% and the silver ETF (AMEX:SLV) rose an unimpressive  4.2%.

It appears investors are willing to pay a generous premium for CEF due to the insured nature of its holdings and the favorable tax treatment versus the ETFs when it is sold.

Ed Steer, a board member at www.GATA.org wrote the following about the overseas demand for precious metals:

"Yesterday, for the umpteenth day in a row, the gold premiums in India were sky-high...far above legal import. They're flying this stuff in by Boeing 747 now. Friday's price rise brought the fence-sitters out in force. My bullion dealer here in Edmonton had his biggest silver day ever...a lot of it was 1,000 ounce good delivery bars...and outsold gold by a ratio of 1,300 to 1.

"Ted Butler advised me that only 50,000 American silver eagles were minted this past week...and they're capable of stamping out about 400,000/week. The authorized dealers were shocked at how few were released. We certainly know that it wasn't demand that fell off.