Almost from the Far East open, gold was under pressure...but the real selling began at 9:30 a.m. in London. Starting from that time, gold got sold off in many separate bouts of selling, with distinct rallies in between. The most interesting part about yesterday's sell-off was the fact that the vast majority of it occurred before the Comex open at 8:20 a.m. Eastern time.

The low for the day came shortly after 11:00 a.m. in New York. The subsequent rally got sold off...and every small attempt to rally after that got sold off as well. Gold closed down $44.30...and net volume was a fairly chunky 260,000 contracts.

As bad as it was for gold, it was silver that really got it in the neck. By the time the real selling in London got under way at 9:30 a.m. BST...silver was already down around 40 cents. And by the time the absolute low of the day [$35.41 spot] was printed at 3:20 p.m. in the New York Access Market, silver was down $4.21 spot. The silver price recovered a bit into the close, but still finished down $3.78 spot on the day. Net volume was immense at 82,000 contracts.

Of all the precious metals, gold was down the least...2.49%. Platinum was down 4.49%...palladium was down 6.64%...and silver was down 9.54%. Silver was down more than 10% on the day at one point.

Although the dollar was up, it certainly wasn't the driving force in yesterday's decline in the precious metals, as it hit its peak and was on its way down long before the decline in the precious metals ended.

The precious metals shares turned out to be just another stock on Thursday, as the gold and silver shares got crushed along with the general equity markets. They gapped down more than 5% at the open...and never got off the mat for the rest of the day. The HUI finished down 7.71%

Needless to say, the silver shares were obliterated...and Nick Laird's Silver Sentiment Index [along with the HUI] took it's biggest 1-day percentage hit that I can remember...down 11.49%.

(Click on image to enlarge)

The CME's Daily Delivery Report had no action in either gold or silver worth mentioning, but if you want to look anyway, here's the link.

The GLD ETF showed no change...but SLV showed a withdrawal of 1,703,997 troy ounces.

The U.S. Mint had a smallish sales report yesterday. They sold another 7,000 ounces of gold eagles...500 one-ounce 24K gold buffaloes...and 46,000 silver eagles.

The Comex-approved depositories reported receiving 612,497 ounces of silver on Wednesday...almost all of it went into Brink's, Inc.

Here's a chart that Nick Laird over at sharelynx.com sent my way late last night. The title to the chart is self explanatory...and I suggest you use the 'click to enlarge' feature as this is a monstrous chart. My good friend Ian Gordon over at the longwavegroup.com has always said that before this bear market breaths its last, we'll see the Dow back at 1,000 points.

(Click on image to enlarge)

¤ Critical Reads

CFTC backs down on commodity trading rules

The U.S. futures regulator has yielded on several contentious parts of a plan to crack down on commodity speculation, marking a modest victory for banks and traders who have lobbied to limit increased market oversight.

A draft of the final rule by the Commodity Futures Trading Commission, reviewed by Reuters late on Wednesday, maintains that the Dodd-Frank Wall Street overhaul law requires position limits -- caps on the number of contracts a single trader can hold -- to prevent excessive speculation in oil, grain, silver and other commodity markets.

It still remains to be seen how this affects position limits in silver...as some ruling has to come out of the CFTC on this. Once I learn more, I'll post it in this column.

I extracted this Reuters story from a GATA release yesterday...and the link is here.

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Moody's Bank Downgrades: What, Us Worry? - Matt Taibbi

The spin that’s being circulated on this is that Moody’s isn’t dissing the banks per se. Rather, Moody’s has just suddenly decided to become concerned that in the post Dodd-Frank world, the U.S. government would not bail out all of these banks, should they need to be bailed out. The WSJ is selling this as nothing more than the ratings agency deciding finally to apply an equal touch to all the troubled members of the Too Big To Fail club.

This Matt Taibbi blog was posted over at rollingstone.com...and comes with the usual 'R' rating...as Matt uses some very naughty words. This is Roy Stephens first offering of the day...and the link is here.

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Mark Faber Warning Bigger Financial Crisis on the Way

This 4:10 Fox News video clip with the good doctor is posted over at youtube.com...and is definitely worth watching. I thank Nitin Agrawal for sharing it with us...and the link is here.

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IMF's Christine Lagarde blames politicians for bringing world to brink of recession

Placing responsibility for a potential global recession squarely on the shoulders of national policymakers, IMF managing director Christine Lagarde said the threat comes not from a lack of options to avert a crisis but from a shortage of political will.

In a call to arms for the 187 countries attending the IMF’s annual meeting in Washington this week, she said leaders must “take more action than has already been done” and sought to resurrect the “collective momentum and spirit” of the London G20 meeting in April 2009.

If this isn't a case of the pot calling the kettle black, I don't know what is. This story was from The Telegraph late last night...and is another Roy Stephens offering. The link is here.

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This is a political problem - and governments are all out of ammunition

Rarely have economic policymakers seemed as devoid of solutions as they are in Washington this week for the annual meeting of the International Monetary Fund.

After more than three years of crisis fighting, the language is again one of growing alarm and panic, but tinged with a war-weariness that doesn’t bode well for the collective action needed to halt the slide back into recession.

The contrast with the mood at the same event two years ago in Istanbul could hardly be starker. Then, finance ministers and central bankers were roundly congratulating themselves on having saved the world from a second Great Depression. They’d rescued the banking system, pump-primed national economies with fiscal stimulus and flooded the world with newly-printed money.

The solvency issue at the heart of the Western banking system wasn’t solved at all, but merely papered over.

This news item, also from late last night in The Telegraph, is a must read. Once again I thank Roy Stephens for the story...and the link is here.

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European banks head towards another meltdown

Fears over the state of the eurozone economy weighed heavily on the region's banking sector on Thursday as fears grew that the industry is headed for another meltdown.

Shares in some of Europe's largest banks fell by 10pc as the cost of insuring European lenders' senior bonds rose to record levels, according to credit default swap prices. The Markit iTraxx Financial Index of contracts on the senior debt of 25 banks and insurers climbed to an all-time high 315.5 basis points.

This story from The Telegraph was posted just before midnight last night and, as usual, I thank Roy Stephens for providing another must read story for us...and the link is here.

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The great euro swindle

Very rarely in political history has any faction or movement enjoyed such a complete and crushing victory as the Conservative Eurosceptics.

The field is theirs. They were not merely right about the single currency, the greatest economic issue of our age – they were right for the right reasons. They foresaw with lucid, prophetic accuracy exactly how and why the euro would bring with it financial devastation and social collapse.

Meanwhile, the pro-Europeans find themselves in the same situation as appeasers in 1940, or communists after the fall of the Berlin Wall. They are utterly busted.

Wow! No shades of grey here! This op-ed piece was in The Telegraph yesterday...and is Roy Stephens last offering for the day. This is definitely worth the read...and the link is here.

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Gold’s Price Surge Skews Inflation Numbers Across Asia

The surging price of gold is fueling inflation from India to Indonesia and forcing statisticians to decide whether jewelry made of the metal still belongs in consumer-price indexes.

In South Korea, gold rings will be dropped from the inflation basket for the first time since 1975 as part of a scheduled reweighting in December, Bang Tae Kyoung, deputy director of the statistics agency, said in an phone interview from Daejeon. “People are now buying gold mostly for investment purposes, and so it should be classified as an asset, rather than spending,” Bang said.

I guess that means that gold is money! I ripped this Bloomberg story from a GATA release yesterday...and the link is here.

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Rick Rule: What he is buying with his own money and why

With gold and silver prices under attack, King World News interviewed one of the most street smart pros in the resource sector, Rick Rule, Founder of Global Resource Investments, which is now part of the $10 billion strong Sprott Asset Management. When asked how investors should be handling these price swings, Rule responded, “Eric, money is made by buying low and selling high and the opportunity to buy low shouldn’t be regarded as a bad thing. The truth is opportunity comes gift wrapped, you just have to understand when it’s gift wrapped. We talked in prior interviews about volatility, that’s what this is.”

Eric sent me this Rick Rule blog yesterday...and needless to say it's a must read from beginning to end. The link is here.

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India's Gold Market: Consumers Are Turning into Investors

Here's a short piece about Indian gold demand. It was written by Alena Mikhan and Andrey Dashkov...and is posted in yesterday's edition of Casey's Daily Dispatch. You have to scroll down a bit to get to it, but it's definitely worth your time...and the link is here.

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Gold can serve as an economic indicator too

“While industrial commodities have fallen due to the anticipated declines in global growth, the rising gold price demonstrates gold’s monetary attributes,” said Nick Barisheff, president and chief executive officer of Bullion Management Group Inc. “It is these monetary attributes which propel gold above other commodities as an indicator of global economic wealth.”

This short story was posted over at marketwatch.com yesterday...and I thank Florida reader Donna Badach for sending it along. The link is here.

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Dancing ghosts: Murray Pollitt

The latest letter from Murray Pollitt of Pollitt & Co. in Toronto sees the Swiss franc's devaluation as just one of many competitive devaluations made inevitable by floating exchange rates. When devaluation comes for the dollar, Pollitt writes, money will go into gold but even more into stocks. Pollitt's letter is headlined "Dancing Ghosts"...and is posted over at the gata.org website. The link is here.

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Financial Cataclysm & Gold Unimaginably Higher: Nigel Farage

Today's last story is this King World News blog that Eric sent me late last night. Nigel is one of my heroes...and the world needs more people like him. This short blog is well worth the read...and the link is here.

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Well, if you thought what happened in the precious metals market yesterday was free-market forces in action, then I've got a bridge I'd like to sell you.

Any attempt by gold to establish itself as an alternative to the remaining fiat currencies in the world yesterday, was crushed by the bullion banks...as the world went into a mini melt-down. They came out all guns blazing shortly after the London open...and the rest, as they say, is history.

With Far East and European bourses down across the board...and gold remaining steady...the bullion banks started the ball rolling down the hill with the sell-off at 9:30 a.m. in London. And every time the banks stopped selling, gold rose...and they had to start the process all over again. This price pattern is easy to spot on any gold chart...and is obvious on the Kitco chart at the top of this column.

Not only did the bullion banks take out gold's 50-day moving average with ease...they also managed to drop the silver price over $4 during yesterday's trading session and take out its 200-day moving average at the same time! I must admit that I was taken aback by the ferocity of the attack on silver yesterday. So much for 'a bridge too far'. There is zero chance that these were random market events.

Here's gold's 1-year chart.

(Click on image to enlarge)

And the 1-year silver chart...nothing free market about yesterday's price action.

(Click on image to enlarge)

We're close to being oversold in silver...and we should hit the oversold mark when this graph is updated with today's data.

One thing is for sure, is that the bullion banks were covering shorts...or buying every long that was dumped by the technical funds yesterday. Both Ted and I are expecting an excellent Commitment of Traders Report when it comes out at 3:30 p.m. Eastern time today. But, of course, none of Wednesday's or yesterday's price action will be in it. However pure common sense should tell us that the bullion banks now hold the smallest net short position in virtually all the precious metals that they've held in years.

Of course it was silver that was the main target...and in the thinly-traded Far East market earlier today, they slammed the metal for over two bucks in an attempt to cover every possible short they could. This looks like an act of desperation by the bullion banks...and it's obvious to me that they want it done in a hurry. I'm only guessing, of course, but I'd say that we're very close to a major bottom in silver...and it only remains to be seen how far below its 50-day moving average they can push gold.

And, if the thinly-traded late afternoon session in the Far East is any indication, they're not having much luck. They got the price down over $20 at one point...but just minutes before the London open, the gold price is now above yesterday's closing price in New York...and this rally is continuing now that London is open.

Obviously there are lots of buyers waiting to scoop up cheap gold. And why not...as JPMorgan et al have been thoughtful enough to mark down the price. These might be deep-pocket buyers in India and/or China...but there's also the possibility that it's a short covering rally as well.

If you didn't listen to the Rick Rule blog posted further up in this column, I urge you to take the time...as these are buying opportunities for the brave...while "blood runs in the streets".

My bullion dealer wasn't busy at all until prices turned up in the afternoon in New York. But once that happened, the phone started ringing off the hook...and business was very brisk, almost all of it silver bullion. The 'buy the dips' crowd was out in force again.

The preliminary open interest numbers for yesterday's trading day were not what I was expecting at all. There were huge increases in open interest in both gold and silver. Considering the price action, I was expecting the exact opposite. The final numbers that are posted on the CME's website later this morning should bring more clarity...hopefully. Wednesday's final open interest numbers for silver and gold showed small declines in both metals.

Volume in gold, as of 4:39 a.m. Eastern, is pretty high...41,000 contracts...which is not as high as this time yesterday. Silver's volume [14,000 contracts] is enormous, which is not surprising considering the two dollar smack-down it got in the thinly-traded Far East market earlier today. With the silver price now far below its 200-day moving average, one has to wonder just how many leveraged tech fund longs are left to liquidate. My guess is not many, but 'da boyz' are going after them anyway.

Nobody ever said that riding a bull market would be easy...especially a market that is managed by all the power and all the money in the world. The bullion banks can shake the tree as hard as they want, but they can't keep prices down forever...and they can only get them so low. As I said yesterday, once they've forced every leveraged long they can to sell out, then the bottom is in. If I had to bet ten bucks, I'd say we're almost there right now.

The G-20 meeting is this weekend. One has to wonder if this smash-down in the precious metals is in some way related to that. I'm not expecting much to come out of this meeting, but you never know...as it's only a matter of time before the world is forced back on some sort of gold standard.

I've always talked about the end of the economic, financial and monetary systems as we know them. Well, we're standing on the edge of that precipice right now.

Before signing off for today...I'd like to point out that now is the time [while 'blood is running in the streets'] to either re-adjust 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.

Since today is Friday...and considering the price action up to this point [4:40 a.m. Eastern time]...it's a pretty good bet that the rest of the trading day in gold and silver will be worth watching.

Enjoy your weekend...and I'll see you here tomorrow.