December 7, 2010 -- A Day Which Will Live in Infamy

The gold price didn't do much of anything during Far East trading on Tuesday... but, an hour after London opened, the gold price began to move higher... with the rally lasting until about 8:45 p.m. in New York when the selling began. A dollar rally began in earnest about fifteen minutes later at 9:00 a.m. Eastern time. It was, as they say, all down hill from there... with an extra shot coming to the downside in electronic trading well after Comex trading was done for the day. Gold closed above $1,400 spot... but just barely.

From its high of the day [$1,432.50 spot]... to its low of $1,395.10 at 4:15 p.m. Eastern time... the gold price got clocked for $37.40.

But, the big hit was saved for silver... which, by now, should be no surprise to anyone. After doing nothing in Far East trading, silver began to rise steadily right from the London open at 8:00 a.m. GMT... hitting its high of the day [$30.73 spot] at the same second that gold did... about 8:45 a.m. in New York. By mid-lunchtime, silver was down a dollar... and then got absolutely slaughtered in electronic trading, about an hour after the Comex closed. The silver price dropped over a dollar in just over an hour... with its low of the day at $28.46 spot. During a seven and a half hour period, silver got taken down $2.27 cents!

Except for the take down the Friday afternoon after the U.S. Thanksgiving holiday, this had to be the most egregious example of silver price management I have ever seen... especially the dollar plus take down in electronic trading, where there was virtually no volume at all.

Ted Butler is not entirely sure who the culprit was yesterday. He didn't get the impression that it was all the bullion banks doing. He suggested that it might be high frequency traders unwinding a position... as silver volume's have been enormous lately, with very few changes in open interest. As I mentioned in this column yesterday, silver was 'in play'.

The other thing that Ted mentioned was the possibility that, with huge margin calls going out at the close of Comex trading, the price was taken down below Monday's opening price to prevent that from happening. But that doesn't explain who butchered the price between 3:20 p.m. and 4:20 p.m. yesterday afternoon.

But, regardless of all of the above, what happened yesterday was, as Ted put it, the most rigged commodity in the world, being aided and abetted by the crooks at the CME. The exchange and the CFTC should be all over this type of blatantly illegal market activity... but, knowing them, they won't do a thing. And neither will your silver companies.

The world's reserve currency fell about 40 basis points up until 8:45 a.m. Eastern time Tuesday morning. All of gold and silver's big gains of yesterday came between 3:00 a.m. and 8:45 a.m. Eastern time, as the dollar fell 18 basis points during that period. From that 8:45 a.m. time, the dollar began to work higher... and reached its absolute high at the close of electronic trading at 5:15 p.m. late Tuesday afternoon... up 77 basis points.

During the New York trading session, both gold and silver had their big losses between 8:45 a.m. and 12:30 p.m. During that time, the dollar had risen less than 30 basis points. The big smack-down in both metals in electronic trading occurred in an 80 minutes period between 3:00 p.m. and 4:20 p.m. During that time period, the dollar fell 10 basis points.

Was yesterday's dollar move in any way related in severity to the drop in price in both metals? Absolutely not. The only thing that is for sure, is that the precious metals sell off... and the dollar rally... began at the same instant... and there wasn't a damn thing in the real world of supply and demand to warrant the price action. It's amazing to watch JPMorgan et al [if it was all them] pull this stunt with all the lawsuits they have pending against them.

We had an 80 point rally in the dollar on Monday and virtually nothing happened, so why would Tuesday's 77 point rally be any different? Well, maybe 'da boyz' were celebrating the 69th anniversary of Pearl Harbor at the expense of the precious metals.

The gold stocks headed for negative territory the moment that equity trading began at 9:30 a.m. And, in actual fact, the precious metal stocks were recovering quite nicely until the plug got pulled shortly before 3:00 p.m. Eastern time. The HUI, which was down 2.45%, finished on its absolute low of the day. But, all things considered, it could have been far worse. Of the 67 stocks I track, there were actually 6 of them in the green at the close of trading... and a couple of them were silver stocks!

Yesterday's CME Delivery Report showed that 68 gold and 22 silver contracts were posted for delivery on Thursday. The link to that action is here.

Over at the GLD ETF yesterday, there was a tiny withdrawal of 9,763 ounces. However, it was an entirely different story over at the SLV ETF... where they reported receiving a staggering 4,007,652 troy ounces of silver. Ted says that despite yesterday's crucifixion, the SLV ETF is still owed a lot of silver.

The U.S. Mint had no sales report.

It was a busy day over at the Comex-approved depositories on Monday. At the end of the day, they reported a net withdrawal of 340,877 ounces of silver. There was activity in all four warehouses... and the report is worth looking through. The link is here.

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