After coming under a bit of selling pressure early in Far East trading, gold worked its way slowly higher...and by 1:00 p.m. Hong Kong time, a firm rally took hold. This lasted until the London a.m. gold fix, which occurred at 10:30 a.m. in London...which is 5:30 a.m. Eastern. The a.m. London gold fix is not to be confused with London p.m. gold fix which occurs four and a half hours later.

This London a.m. gold fix turned out to be the high of the day...and the gold price trended lower for the rest of the Tuesday trading session in both London and New York. Gold was up about $50 at the a.m. fix...but lost more than half of those gains by the close of electronic trading in New York. Spot gold finished up $21.70 on the day. Net volume was around 197,000 contracts.

Silver's price path was virtually the same as gold's, except for one thing. The high of the day came at the London silver fix around noon local time, which is 7:00 a.m. in New York. From there, silver's price decline looked very similar to the gold price decline.

At the silver fix, the price was up about $2.75 from Monday's New York close, but by the time that trading ended in New York, that gain had been cut to $1.13 spot. Net volume in silver was pretty high as well...around 70,000 contracts.

The gold stocks gapped up almost four percent at the open, but the selling pressure began immediately...and even though gold finished up over twenty bucks on the day...and the Dow did well for itself...the gold stocks got sold off every time any sort rally began. You can see this in the saw-tooth pattern of the HUI, which actually finished down 0.55% on the day. I found this rather surprising...and I kept asking myself why this was happening. I didn't have an answer.

Although most of the junior silver stocks that I own and track did well for themselves on Thursday, almost all the large cap stocks that make up Nick Laird's Silver Sentiment Index, did poorly. But the index managed to close up a skinny 0.19% nonetheless.

(Click on image to enlarge)

The CME Daily Delivery Report didn't show much activity, as only 19 gold and 17 silver contracts were posted for delivery on Thursday. The link to that action is here.

I was expecting big withdrawals from both GLD and SLV yesterday. Sure enough, GLD was down 155,725 troy ounces...but that wasn't nearly as bad as I was expecting. But the real shocker was silver...and I had to look at the number three or four times before I actually believed what I was looking at. For the second day in a row, an authorized participant had deposited another huge amount of silver. This time it was 3,699,316 ounces! That was after the 2.7 million or so ounces added on Monday!

Let's see. Silver dropped from $40 to $26 in two and a half business day...and SLV has had 6.4 million ounces added to it since the bottom was in early Far East trading on Monday morning. If you're looking for an explanation, I don't have one. Without doubt Ted Butler will have a comment or two about this incredible turn of events in his mid-week commentary to subscribers later today...and I'll steal whatever I think I can get away with for my Thursday column.

The U.S. Mint had another sales report yesterday. They sold another 10,000 ounces of gold eagles...and 100,000 silver eagles. I'm sure that the mint would have sold more silver eagles if they had any to sell. No one-ounce 24K gold buffaloes were sold.

It was another busy day over at the Comex-approved depositories on Monday, as 532,896 ounces of silver were reported received...and 1,114,946 were shipped out. Most of the action was at Brink's, Inc...and the link to all of that is here.

I'm delighted to report that I have very few stories today...and those I do have are mostly precious metals related.

¤ Critical Reads

More Gloom Lies Ahead for Cities, Report Says

Nearly a third of the nation’s cities are laying off workers this year. More than half have canceled or delayed infrastructure projects. And two out of five have raised their fees.

The catalog of service cuts and fee increases comes as America’s cities are bracing for what they expect will be their fifth straight year of declining revenues, according to a survey of city finance officers to be released on Tuesday by the National League of Cities.

This story was posted in yesterday's edition of The New York Times...and I thank Roy Stephens for sending it along. The link is here.

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German turmoil over EU bail-outs as top judge calls for referendum

Germany's top judge has issued a blunt warning that no further fiscal powers may be surrendered to Europe without a new constitution and a popular referendum, vastly complicating plans to boost the EU's rescue machinery to €2 trillion (£1.7 trillion).

Andreas Vosskuhle, head of the constitutional court, said politicians do not have the legal authority to sign away the birthright of the German people without their explicit consent.

"The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. It may not be abandoned by the legislature (even with its powers to amend the constitution)," he said.

This Ambrose Evans-Pritchard offering from the Monday edition of The Telegraph was sent to me by Casey Research's own Bud Conrad, for which I thank him. It's an absolute must read...and the link is here.

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Ireland denies secretly printing old currency

The Republic of Ireland's government has had to deny it has been secretly printing punts to facilitate an Irish exit from the euro, a rumour that has been spreading through Dublin's chattering classes in recent weeks.

Such has been the ferocity of the speculation that new notes have been printed, a parliamentary question was tabled by Fianna Fail TD Sean Fleming, who asked Finance Minister Michael Noonan when was the last time Irish punts were printed.

This story showed up in the Belfast Telegraph on Monday...and I thank reader Charley Orr for sharing it with us. It's worth your time...and the link is here.

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Việt Nam: Paying Extra for Gold

Global investors have been rushing to liquidate gold positions in the last few days after the recent price surge, but demand has remained strong in Vietnam, where people traditionally see the precious metal as a buffer against stubbornly high inflation.

On Monday the domestic gold price was trading at a record premium to the international price of 11 percent, according to Ho Chi Minh City Securities, a local stockbroker. On Tuesday morning, the premium had moderated to nearly 9 percent but remained much higher than the typical premium of 1 or 2 percent.

Demand has been robust because of ongoing concerns about inflation, which has moderated but still remains high at 22.4 per cent year-on-year in September. The central bank’s rigorous enforcement of a 14 per cent deposit interest cap in recent weeks has also driven many customers to pull their money out of some of the smaller banks, who were offering unofficial rates of as much as 19 percent in a desperate bid to bring in cash. That money appears to be moving into gold and dollars.

This blog was posted over at the Financial Times of London early yesterday morning. I thank reader Bob Richardson for sending it along...and the link to this must read piece is here.

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Việt Nam hopes to rig domestic gold market before others do

The State Bank of Vietnam has designated businesses that will be allowed to import additional gold in an effort to cool down the domestic price.

The bank said on Monday that gold price had dropped to its lowest level in weeks to just US$1,532.45 per ounce on global markets -- from a record high of US$1,920 per ounce on September 6 -- leading to dramatic fluctuations on the domestic market. The result has been a domestic gold price that has remained for weeks much higher than the world price.

State Bank deputy governor Nguyen Dong Tien also revealed yesterday that the central bank would submit its final draft of a decree on the gold market to the Government for approval this week. Under the draft, the State Bank would control and intervene in the gold market if needed, preventing speculation and price manipulation. Trading in gold bars would also be restrained, Tien said.

Individuals and organisations who wanted to do business in gold jewelry or artworks would be required to establish enterprises and meet several stringent requirements, he added. Meanwhile, the central bank has warned investors to be wary of speculation and manipulation when trading in gold.

The story, posted at Vietnam News yesterday...was updated again early this morning...and is well worth your time. I ripped this story from a GATA release yesterday...and the link is here.

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The Chinese Mean To Control The Global Gold Market

I've already run a couple of stories on the new Chinese PAGE gold trading platform...but something about it showed up in Forbes yesterday. It sounds suspiciously like it was plagerized from the previous story I posted on this.

This writer says that it won't be open until June 2012...but I was always under the impression that they were going to go live in the 4th quarter of this year.

"Get ready for the Pan Asian Gold Exchange, scheduled to open in June, 2012 in Kunming City, Yunman Province– the gateway to all of Southeast Asia. This is serious, as the Pan Asian Gold Exchange is a part of China’s five year plan– which means it is part of China’s strategy for dominance in global financial markets and the global economy."

Everyone has great expectations...and we'll have to see how it all turns out...whenever it gets started, that is.

This short story from Forbes is another one I stole from a GATA release yesterday...and the link is here.

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You Must Own Gold in World Drowning in Fiat - Richard Russell

Here's a Richard Russell blog that Eric King sent my way late last night. It's a short piece, so won't take much of your time. The link to the King World News blog is here.

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Gold has bottomed, Tocqueville's Hathaway tells King World News

Gold and gold shares have bottomed after a panic...and central banks will keep creating money for bailouts without solving any of the world financial system's problems, continuing gold's bull run, Tocqueville Gold Fund manager John Hathaway told King World News yesterday. An excerpt from the interview is headlined "Here Is Why Gold and Silver Have Bottomed"...and the link is here. I thank Chris Powell for providing the preamble.

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The day the U.S. announced that the dollar would be devalued by 10 percent. By switching the yen to a floating exchange rate, the Japanese currency appreciated, and a sufficient realignment in exchange rates was realized. Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake. - Paul Volcker, Nikkei Weekly, 2004

I was very happy to see both gold and silver rally during the afternoon trading session in Hong Kong on Tuesday morning...and early morning trading in London. It was all the U.S. bullion banks trading on the Globex, of course...but they were both impressive rallies nonetheless.

I mentioned to Ted Butler that I thought it was possible that both these rallies were short covering rallies by the bullion banks...and the ensuing sell-offs were the small Commercial traders [Ted's Raptors] selling their freshly-accumulated long positions for big profits. If that's what was happening, then the bullion banks [the 1 through 8 Commercial traders] would have been snapping up all these long positions for themselves. Ted, who had previously explained this kind of activity to me throughout the years, thought that was certainly a possibility.

If that was the case, it will show up in Friday's Commitment of Traders Report. The cut-off for that report was at 1:30 on Tuesday afternoon...the close of Comex trading.

The preliminary open interest numbers in both gold and silver for Tuesday's trading day showed very large declines, so the final numbers posted on the CME website later this morning should be something to see.

The final open interest numbers for Monday's trading day, also showed open interest declines in both metals as well...despite the fact that the preliminary o.i. numbers were ugly.

Based on all this open interest data, Friday's COT report should be a sight to behold.

I wish the CME would report changes in open interest the same way that the Japanese TOCOM does. They have a COT report at the close of business every day...and it lists every company by name...and the long and short positions that each of them hold. It's totally transparent.

The American version of the COT Report is deliberately opaque to hide the goings-on of the U.S. bullion banks...not just in gold and silver...but in all commodities and currencies in general. A quick look at the monthly Bank Participation Report shows you just how much influence the U.S. banking system has on commodity prices...and it's all the big five U.S. commercial banks, with JPMorgan at the top of the heap. When you're running an empire, you have to do what empires do.

So where do we go from here? With virtually every leveraged long position in all the metals blown out of their positions in the last three or four days, they aren't going to be coming back on the long side any time soon.

As my friend John Hathaway pointed out in his KWN blog earlier in this column, it's entirely possible that bullion banks would want to retest the lows of early Monday morning. If that does happen, it certainly wouldn't be a free-market event, either...as the bullion banks are quite capable of painting the charts any way they want them to look.

I've had several readers e-mail me in the last few days saying that we still haven't seen the lows for this move down in either metal. I don't know if that's true or not, but who are the sellers going to be, as the vast majority of them are already gone...and if there's no one to sell, the bullion banks can't get the price down. We'll just have to see how this all shakes out in the days and weeks ahead.

But one thing is for sure, the level of physical off-take on Planet Earth is in ultra-high gear...and the longer that prices remain at these levels, the more physical metal disappears into the hands of the buy-the-dip investors...plus the newbie buyers that are showing up...and are buying with both hands because they missed the initial run-up. My bullion dealer is seeing a lot of those kind of people showing up in the store these last few days.

In Far East trading earlier today, gold was down a bit, but rallied going into the London open...and is up about seven bucks as of 4:21 a.m. Eastern time. Silver was down over a dollar at 2:00 p.m. Hong Kong time, but minutes before London opened, the price jumped over $1.50 in no time at all...and is up about two bits at the moment. Gold net volume is around 45,000 contracts...and silver's net volume is about 11000 contracts, so there's lots of activity. But none of it will make it into Friday's COT report, as it's now after the cut-off.

That's it for another day. I haven't the foggiest idea as to what will happen during the balance of the Wednesday trading day in either London or New York, but whatever does happen, it probably won't be boring.

I hope your day goes well...and I'll see you right here tomorrow.