As if the world didn’t have enough to worry about already, news of an Iranian mob attacking the British embassy in Tehran has reminded people of the inherent political fragility of the Middle East – rekindling memories of the 1979 takeover of the US embassy in the same city following the Iranian Revolution.

Though markets generally held steady yesterday, the news after the close on Wall Street that Standard & Poor’s was downgrading a slew of large British and American banks was sure to scare investors. Sure enough, markets have fallen this morning, though news that the Chinese have cut bank reserve requirements has helped stabilise European markets. Commodities also fell in early trading, with gold and silver once again caught in the cross hairs – though the gold price is still above $1,700 per ounce. Silver has dropped back below the $32 mark.

As Dan Norcini comments at his blog, the latest Commitments of Traders (COT) reports for gold and silver confirm the lack of speculative interest in these metals at the moment, as a result of the eurozone problems. In Dan’s words: “There is simply not enough speculative interest to push prices sharply higher at this time. Something will have to change on the fundamental front that triggers a strong desire on the part of the speculators to bid up the prices of both metals.”

Any fundamental change will have to involve some sort of short-term solution to the problems in Europe. If that were to occur, risk trades would be back with a vengeance as far as hedge funds would be concerned. As James Turk noted in his latest King World News Blog piece, under these circumstances we could expect silver to at least double in a fairly short space of time, given the amount of speculative money that is sitting on market side-lines at the moment. To use a hoary old cliché: silver is a coiled spring waiting to pop.