The gold price didn't do a whole heck of a lot yesterday...and the brief up-and-down spike over the $1,530 spot price level shortly before lunch in New York, was pretty much all the excitement there was. Volume was light.

For the second day running, silver was the star performer of the day. Like Tuesday, the price traded pretty much flat until about a half hour before London opened...and then a rally began that lasted until gold's price spike just before noon Eastern time. From there, silver pretty much traded sideways for the rest of the Comex session...and the electronic trading session that followed. Volume was moderate.

The dollar rose about 35 basis points from the start of Far East trading, until about half an hour before London opened. Then the dollar rolled over and slowly headed south...hitting its absolute low of the day just before lunch in New York...which happened to be the high tick in the gold price yesterday as well. From there, the dollar recovered a bit into the close...basically finishing unchanged on the day.

What little gold price activity there was yesterday, sort of followed the dollar's movements...especially the inflection points before the London open and the just before lunch in New York. This was true in silver as well.

The gold stocks followed the gold price almost tick for tick yesterday...with the HUI finishing up 0.81%.

Of course, most [but not all] silver stocks did several orders of magnitude better than the gold equities. However, considering the price action both Wednesday and yesterday, I'm actually surprised that the shares haven't done better than that. I guess we should be thankful for small mercies. Here's Nick Laird's 'Silver Sentiment Index'.

The CME's Daily Delivery Report showed that one gold, along with 13 silver contracts, were posted for delivery on Friday.

There was no reported change in GLD yesterday...but another huge chunk of silver vanished from the SLV ETF...as 4,632,618 were withdrawn. With silver up strongly on Tuesday and Wednesday, one would think that silver would be pouring back into SLV...but that hasn't been the case, as the ETF had withdrawals on both days.

The U.S. Mint had another sales report yesterday. They sold 5,000 ounces of gold eagles along with 25,000 silver eagles.

The Comex-approved depositories reported that no silver was received on Tuesday...and a smallish 67,942 ounces were withdrawn.

Here are a couple of graphs that Washington state reader S.A. sent me yesterday...neither of which require any further embellishment from me.

This one is of particular interest...with gold hitting a new all-time high against the euro.

¤ Critical Reads

The Operator Of The World's Largest Oil Tanker Fleet Gives Up On The Global Recovery

Norway's Frontline, which operates the world's largest oil tanker fleet, announced an 81 percent decline in net income for the first quarter compared to last year.

The company issued a grim outlook: “It is hard to see a strong recovery in the tanker market as long as the net supply of tonnage grows faster than the total ton mile demand.”

This short, must read article, was posted over at businessinsider.com...and I thank reader 'David in California' for providing it. The link is here.

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Worst drought in 50 years along Yangtze

Casey Research's own Bud Conrad sent me today's next offering which appeared over at the chinadaily.com.cn website yesterday.

The worst drought in 50 years to hit provinces along the Yangtze River may continue to plague Central China. The China Meteorological Administration warned on Tuesday that little rain is expected in the coming 10 days and highs of 36C are likely to hit the central and southern parts of China.

I'd heard rumours of drought conditions in parts of China...but here's a real in-you-face story about it...and the pictures are depressing. This is definitely worth your time...and the link is here.

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Wiped off the map: Shocking before and after images reveal how giant tornado ripped apart Joplin's city landmarks

While we're on the subject of unhappy pictures, here's an article that was posted on England's dailymail.co.uk website yesterday.

New aerial images emerged showing in terrifying detail the path of the twister which destroyed the Missouri city. The shocking photos reveal for the first time, the true extent of the damage caused when the mile-wide tornado killed at least 122 people...and blasted much of the city off the map.

I thank Roy Stephens for sharing this story with us...and the link is here. Be advised that this URL has a lot of photos...and has a few imbedded videos...so it may take a bit of time for it to load if your computer uses older software.

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Market manipulation is the very purpose of derivatives

Here's a short GATA release which I'm going to leave in Chris Powell's capable hands. The Bill King quote is worth writing down...and the April, 2001 Peter Warburton article, if you haven't read it before, is more than worth your time...especially the three paragraphs under the sub-heading "Central banks are engaged in a desperate battle on two fronts". Ever since I read them, I have always called them the 'three most important paragraphs ever written"...when used to describe the current financial system.

The link to the GATA release...and the Warburton article...is here.

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GATA urges Ron Paul to probe Fed's gold swaps; he tells CNBC he will

On Tuesday, GATA Chairman Bill Murphy and GATA secretary/treasurer Chris Powell met in Washington with U.S. Rep. Ron Paul, R-Texas, chairman of the House Subcommittee on Domestic Monetary Policy and Technology, and two of his staff members.

This is another GATA release...and, once again, I'll leave it up to Chris...as he's already done the heavy lifting for us. There's a lot of reading in this, so I hope you have the time...and the link is here.

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Welfare state democracy is sure to destroy the dollar: John Hathaway

Writing at the King World News blog, Tocqueville Gold Fund manager John Hathaway has studied the age of the gold bull and concludes that the bull has longer to run because welfare state democracy has pushed the U.S. dollar past the tipping point.

"Negative real interest rates, less obvious than CPI inflation, are the stealthy pillar of welfare state finance. Gold prices correlate inversely with real interest rates, as we have been suggesting for the past decade. This relationship is one of the most reliable indicators of the macro climate for gold. Negative real rates ought to be a flashing green light for capital to seek out gold."

Hathaway, one fears, has it exactly right. His essay is headlined "Gold & US Today vs. 1980 Mania".

I thank Chris for wordsmithing the preamble...and the link to this must read KWN blog, is here.

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World back on gold standard by 2014, Ian Gordon tells MineWeb

MineWeb's Zig Lambo interviewed newsletter writer Ian Gordon of the Longwave Group yesterday...and gets a prediction of the world's return to a gold standard by 2014 as credit-and debt-based money collapses from over-issuance. The interview is headlined "Headed for a 'Gold Standard System' by 2014 -- Ian Gordon". This is another must read...and the link is here.

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Join GATA in supporting appeal of Liberty Dollar founder

This very important GATA release was issued by Chris Powell yesterday. Anyone who was outraged by the treatment that Liberty Dollar creator Bernard von NotHaus received at the hands of the American 'justice' system, can now help out if they wish to do so.

Von NotHaus is seeking acquittal or a new trial, based on insufficiency of the evidence, claiming that the charges against him were based on an unconstitutional reading of federal law.

Once again Chris has already done the hard work...and you can read all about it here.

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Bid to use gold as collateral advances in Europe

Investors are closer to being able to use gold as a trading security after a European parliamentary committee approved a proposal to allow clearing houses to accept gold as collateral, the World Gold Council said Wednesday.

The European Parliament's Committee on Economic and Monetary Affairs Tuesday agreed unanimously to allow clearing houses to accept gold. The proposal, under the European Market Infrastructure Regulation, will be passed to the European Parliament and the Council of the European Union for another round of voting in July.

I have two stories on this. The first is this press release from the World Gold Council...and I thank Washington state reader S.A. for that...and the second is a story out of yesterday's edition of The Wall Street Journal that's printed in the clear in this GATA release linked here. Both are short reads...and both are very much worth your time.

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Manipulating cash prices for a larger derivative payout is a regular feature in all markets. And $50 million is chump change compared to the billions being made manipulating the markets on almost a daily basis. - Bill King, the King Report...May 25, 2011

Gold's volume yesterday, net of all roll-overs, was around 85,000 contracts...which is pretty light. The preliminary open interest number showed an increase of 'only' 7,813 contracts...which is rather subdued compared to the eye-watering numbers we've seen posted in the three days prior to that.

Gold's final open interest number for Tuesday's trading day showed a very large increase of 10,131 contracts, which wasn't much of a decline from the preliminary o.i. number of 15,593 contracts. Based on Tuesday's rather anemic price action, I'm not sure what to read into that number...but it will be in tomorrow's Commitment of Traders Report, so we'll find out then.

Silver's net volume on Wednesday was a bit over 70,000 contracts...about the same volume as Tuesday. The preliminary open interest number for silver showed a rather chunky increase of 6,039 contracts. Hopefully this will be much reduced in the final report later this a.m.

Silver's final open interest number for Tuesday's trading day only showed an increase of 38 contracts. Based on the smallish preliminary o.i. number that showed an increase of only 3,057 contracts, I was hoping for a pleasant surprise...and I got one. This suggests that silver's price rally on Tuesday involved a fair amount of short covering and, like gold, all will be revealed in tomorrow's COT report.

The silver backwardation issue on Wednesday was basically unchanged from what it showed on Tuesday.

The story that came out of Europe yesterday about European Parliament's Committee approving the use of gold as collateral was a pretty big story as far as I was concerned. This is just another step down the road towards the re-monetization of all precious metals. All that's missing is a new-and-improved gold price that would suddenly recapitalize all the nations that have lots of it...but are up to their ears in sovereign debt...the U.S.A. included.

I figure that a price increase of between 500% to 1,000% ought to do the trick.

As I've said many times over the years, there are only three ways that this economic, financial and monetary situation can end...and that's either by a deflationary collapse, a hyperinflationary depression, or a re-pricing of gold. It looks like the race is now on to see which happens first...and the re-pricing option just got a big shot in the arm with yesterday's news.

I'll start off the rest of 'The Wrap' with the 6-month silver chart...and the 50-day moving average at $39.05 is what you should be concentrating on.

Yesterday we closed about a dollar underneath that moving average...and, as Ted Butler said in commentary to his paying subscribers on the weekend..."technical traders don't buy or hold long positions below this."

So the key to what happens with the silver price occurs as soon as the 50-day moving average is broken to the upside...and the technical funds start to lay in their long positions once again. Needless to say, I've been watching the overnight price rally in silver very closely...and I noted that at precisely 2:00 a.m. Eastern time...which is 3:00 p.m. Hong Kong time...the rally in the silver price stalled just below its 50-day moving average.

Today's trading action in silver will be of interest. Will we break through silver's 50-day moving average with some authority...or will it 'fail' at this point? The bullion banks are expert at painting the tape...and know all the technical analyst's 'hot' buttons...and a 'failure' to break through this key moving average to the upside is one of them.

I note, as I hit the send button, that both silver and gold are heading lower with a vengeance...as the bullion banks pulled their bids in both silver and gold shortly before 10:00 a.m. local time in London. The silver price is now down over a dollar below its closing price on Wednesday...so it appears that this 'failure' to break through the 50-day moving average during the thinly-traded Far East market is coming to pass as I mentioned above. It only remains to be seen how low the bullion banks can get the price this time...and how long it takes them. Maybe this will all change when Comex trading begins in New York this morning, but somehow I doubt it.

Volume in gold [as of 5:22 a.m. Eastern] is very light once all the roll-overs are removed...but silver's volume, which had been almost non-existent up until the 'failure' point at 2:00 a.m. Eastern time, is now monstrous, as a lot of yesterday's newly-placed long positions are now being puked up once the price rug got pulled out from underneath them by JPMorgan et al.

There's still time left to either readjust your portfolio...or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and I respectfully suggest that you take a trial subscription to either Casey Research's International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers], with all our best [and current] recommendations...as well as the archives. A subscription to the International Speculator also includes a free subscription to BIG GOLD as well. And don't forget that our 90-day guarantee of satisfaction is in effect for both publications.

See you on Friday.