In my closing comments in 'The Wrap' section of this column yesterday, I was mentioning that the decline in gold and silver prices was out of all proportion to the smallish rise in the U.S. dollar between midnight at 4:00 a.m. Eastern time.

With the co-ordinated efforts of several of the world's central banks to slash U.S. dollar borrowing costs, the exaggerated sell-off made some sort of sense, as it was entirely likely that they were softening them up in advance of the big announcement so that the precious metals prices would not blast higher than they did.

It worked.

The gold price, which had made it up to around $1,726 spot around 10 a.m. Hong Kong time, got sold off pretty hard going into the London open...and shortly before 9:00 a.m. local time, it hit its low of the day around $1,700 spot, before trading sideways.

Then the bank reserve requirement news came out of China at 11:00 a.m. London time, the gold price had a little spike that got beaten back immediately...but when the co-ordinated move by the other central banks came out at 1:00 p.m. in London...gold, silver, oil...and a whole raft of other commodities went vertical instantly.

Comex trading began about twenty minutes later...and by the London p.m. gold fix at 10:00 a.m. Eastern time, the situation had stabilized...and gold traded sideways for the rest of the New York session. All attempts to break through the $1,750 price mark, no matter how tiny, got sold off.

Gold closed in New York at $1,749.40 spot...up $34.00 on the day. Net volume for Tuesday, which was already pretty heavy in early trading in London, was around 158,000 contracts...and I would guess that about 95% of that came before 10:00 a.m. Eastern time.

The price decline in silver during Far East and early London trading was far more pronounced...and the silver price was down about 3% at it's low shortly before 9:00 a.m. in London. But as you can see from the price action in the Kitco chart below, JPMorgan et al had much more of a problem getting the silver price back in the box...and they struggled with it until half-past lunchtime in New York. Both serious attempts to break through the $33.00 spot price were turned back.

One can only imagine how high silver might have risen if 'da boyz' hadn't been dicking with the price in the Globex trading system prior to the Comex open...and in New York once it had.

Silver closed at $32.83 spot, up 91 cents on the day. Net volume was 45,000 contracts.

Here's the dollar chart from yesterday. Note the smallish rally that began shortly after midnight. The precious metals got sold off hard between midnight and about 3:45 a.m. Eastern time...during which time the dollar was up about 30 basis points and trading sideways. There was a slight dip on the China news at 6:00 a.m...and then the big hit moments before 8:00 a.m...which is 1:00 p.m. London time.

The dollar hit its nadir a few moments before 9:00 a.m....and gained back about 40 basis points of its loss by 1:00 p.m. in New York, before trading sideways for the rest of the day.

The gold stocks gapped up about 5 percent at the open...and slowly added to their gains as the trading day wore on. Then they really caught a bid around 2:45 p.m. Eastern time...and the gains accelerated into the close with the HUI finishing up a whopping 7.03%. That has to be one of the biggest 1-day gains in this index, ever!

The silver stocks put in a 'sterling' performance as well, with Nick Laird's Silver Sentiment Index up 7.12%.

(Click on image to enlarge)

The second day of the December delivery month wasn't quite as frantic, as only 4,638 gold contracts and 141 silver contracts were posted for delivery tomorrow.

All the usual suspects were back as issuers or stoppers...JPMorgan, HSBC, Deutsche Bank...and all trading in their house accounts, not for clients. RBS Securities was the biggest short/issuer...and the biggest long/stopper was HSBC USA. There were lot of smaller players on both the issue and stopper side.

There were no real standouts with the 141 silver contracts that were posted for delivery but, like yesterday, this Issuers and Stoppers Report is worth giving the once over...and the link is here.

Both GLD and SLV had precious metals deposited in their respective depositories on the last business day of November. GLD took in 38,905 troy ounces of gold...and SLV took in 2,529,010 ounces.

The new short interest numbers have been posted for SLV and GLD over at shortsqueeze.com. The short position in SLV declined by 4.72%...and is now down to 22.98 million shares/ounces that have been sold naked short. The short position in GLD went the other way, rising 5.04%...and now sits at 22.05 million shares, or 2.2 million ounces sold naked short.

It's Ted Butler's opinion that the vast majority of these short positions are held by JPMorgan et al...and I agree totally. If these crooks had go out and buy all this metal in the open market to pay back what they owe to these two ETFs, the gold price would be substantially higher...and silver's price would be beyond the orbit of Jupiter, or maybe Saturn...as 23 million ounces of silver [12 days of world silver production] just don't exist. They might actually exist, but wouldn't be for sale at anything that resembles the current price of the metal.

That's why I wouldn't touch either of these ETFs with a 10-foot cattle prod.

The U.S. Mint reported selling another 100,000 silver eagles yesterday. For the month of November the mint sold 41,000 ounces of gold eagles...8,500 one-ounce 24K gold buffaloes...and 1,384,000 silver eagles.

The Comex-approved depositories had a slow day on Tuesday. They didn't receive any silver...and only shipped 45,716 ounces out the door.

Silver analyst Ted Butler had his mid-week commentary for his paying subscribers yesterday...and here are two free paragraphs.

"The recent underperformance of silver relative to gold and other commodities presents an added reason to consider silver as undervalued. While many investors view relative price weakness as a reason to avoid purchase, that reaction is incorrect for a market already manipulated to the downside, like silver. In fact, an objective analysis of the relative price moves this year in gold and silver should bring that out. Silver and gold have more in common than any other commodity, making them an ideal relative comparison. As I write this, gold is up $325 (23%) year to date, while silver is up $2 (6.5%). (Admittedly, silver has generally outperformed gold on different time spans). Since there are 3 billion ounces of gold bullion in the world (out of 5 billion oz total), the value of those bullion ounces have increased this year by almost $1 trillion, to over $5.2 trillion. The total value of the world’s one billion ounces of silver bullion has increased by $2 billion to $33 billion. In other words, the increase alone in the value of the world’s gold bullion this year is 30 times greater than the total value of all the world’s silver bullion. Please think about that for a moment."

"My point is that there is not much difference in the investment merits of gold and silver to warrant such a mismatch in the value of each. Both are precious metals valued by world investors in times of economic stress and loss of confidence. That the dollar value of gold is almost 175 times greater than the dollar value of silver is absurd. Let me be clear in what I am saying. I am not saying that gold is valued at absurd levels; I am saying that silver is being valued at absurdly low levels relative to gold. It is absurd that a ten dollar change in the gold price is equal to the total value of all the world’s silver bullion. The true absurdity is that this mismatch in relative values is not yet recognized by the world’s investors, even the big and sharp hedge fund operators. As and when it is recognized, those investors will rush to buy silver. In a very real sense, the higher gold prices climb, the better it is for silver. A higher gold price is the silver investor’s best friend."

While on the subject of silver price management, here's a nifty graph that Washington state reader S.A. sent my way yesterday. It shows the net long position of the Non-Commercial traders in the Comex futures market going all the way back to the beginning of 2006. As the chart clearly indicates, we are at a multi-year lows...and the situation has probably improved even more since this chart was generated. Tomorrow's Commitment of Traders Report should show that.

This is the 'wildly bullish' scenario that Ted Butler has been going on about for the last few weeks...and this Bloomberg chart proves it.

Here's a comment I got from long-time reader C.M. yesterday...and I thought it worth sharing.

"Hi Ed, for what it's worth I've given away around 40 American Eagles as gifts this year both in China and back in the US and the response has been just amazing. The waitress at my local steakhouse in Denver started crying when I gave it to her, and an executive at a company I do work with was so excited it is hard to believe that she is worth around $30m. They are simply fantastic, no-brainer and pretty cheap gifts. In the 40mm clear plastic case with a black foam surround, they look stunning too. So remind your readers that Christmas is just around the corner. Everyone from kids to wives to co-workers will love them. Although wives prefer the gold colored coins. :) Anyway, just my 2c worth. Maybe 3 cents with inflation, especially after the latest move by the Fed."

I have a decent number of stories...and the first few are about yesterday's central bank interventions with more money created out of thin air.

¤ Critical Reads

Central banks open the spigots; stocks, oil, gold go vertical

The one-two punch of China cutting its bank reserve requirement — followed about two hours later by a global central bank action to make it easier for banks to access dollars — sent commodities, the euro and stock index futures in a nearly vertical move higher Wednesday. If you were wondering — risk is on!

Of course, the backdrop for the moves is anything but positive. The People’s Bank of China explained its move as a way to boost liquidity amid market turmoil in developed countries. And the joint statement by the Federal Reserve, the European Central Bank and others summed up their efforts as designed to “ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses.”

This marketwatch.com story was posted on their website around 9:00 a.m. yesterday morning. I thank Florida reader Donna Badach for sending it along...and the link is here.

View full GSD edition

China Unexpectedly Reverses Economic Policy

China's central bank, in a surprise move on Wednesday, shifted its economic focus from fighting inflation to stimulating growth by freeing the nation’s commercial banks to lend more money.

The bank’s move was separate from the subsequent announcement by central bankers in the United States, Europe and Japan that they would pump more dollars into the European banking system. And Western officials said Beijing’s move was not done in coordination with theirs.

Still, China’s motive was similar: to keep credit flowing through the financial markets.

This New York Times story was filed from Hong Kong yesterday. It now bears the headline "Inflation Fears Easing, China's Central Bank Turns to Lifting Growth". That's all b.s. of course. The real reason was that China's economy was about to implode, so they turned on the printing presses...and to hell with inflation. It's well worth the read...and I thank reader Phil Barlett for bringing it to my attention. The link is here.

View full GSD edition

Fed saves Europe's banks as ECB stands pat

The joint offer of currency swap lines by the central banks of the US, Britain, Japan, Canada, Switzerland and the ECB preserves the polite fiction that this was to "ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit".

The interwoven banking and sovereign debt crisis in the eurozone has become so dangerous for the world that the US Federal Reserve has been forced to take emergency action, acting as global lender of last resort to shore up Europe's banking system.

The move came once it was clear that Europe's prostrate banks would struggle to roll over $2 trillion (£1.3 trillion) of debts denominated in dollars. Data from ratings agency Fitch shows that US money markets have slashed funding for French banks by 69pc and German banks by 50pc.

Strains have been ratcheting up over the past two weeks. European banks are mostly shut out of the dollar market, or only able to raise money for a week at a time.

This must read Ambrose Evans-Pritchard offering from yesterday evening's edition of The Telegraph was sent to me by Roy Stephens...and the link is here.

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Ron Paul: Statement on the Fed's Continued Euro Bailout

Here's a 3-paragraph commentary from Congressman Ron Paul about the central banks' bail-out of the European banking system. The second paragraph is an eye-opener. This is a 2-minute read at most...and well worth your time. I thank Australian reader Wesley Legrand for sharing it with us. It's posted over at zerohedge.com...and the link is here.

View full GSD edition

14th Consecutive Week Of Stock Outflows: Retail Refuses To Go Back Into Stocks No Matter What Market Does

This 1-paragraph article posted over at zerohedge.com has a most excellent graph imbedded in it. This is Wesley Legrand's second offering in a row...and it's worth two minutes of your time. The link is here.

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Pensions apartheid: get ready to work until you are 75 as State Ponzi scheme unravels

Experts say the increase in State Pension Age announced by Chancellor George Osborne in his Autumn Statement on Tuesday will not be the last...and millions of younger people should prepare to work until they are 70 or even 75.

“People hoping to retire at a particular age are having to revise their plans and are facing a stark choice between working longer, saving more or retiring poorer.

State pensions are a form of Ponzi scheme where the funds available are insufficient to honour promises issued and so new payments into the fund are urgently required to avoid collapse.

Just a few years ago, I asked who was running the biggest Ponzi scheme; Bernard Madoff or the British Government? Well, we can all see the answer now. Without wishing to be unduly gloomy, it is only fair to point out that six years ago I reported the president of the Institute of Actuaries predicting that new graduates will have to work until 75.

This was posted in The Telegraph yesterday and, without doubt, applies to every working individual anywhere in the Western world regardless of age. It's a must read...and I thank Roy Stephens for bringing it to my attention. The link is here.

View full GSD edition

Britain Downgrades Diplomatic Ties With Iran; Orders London Embassy Shut

Britain said on Wednesday that it had closed its embassy in Tehran, withdrawn all its diplomats and ordered Iran to do the same within 48 hours at its own diplomatic mission in London in the worst rupture of relations in decades.

The measures were announced in Parliament by Foreign Secretary William Hague a day after Iranian protesters shouting “Death to England” stormed the British Embassy compound and a diplomatic residence in Tehran, tearing down the British flag, smashing windows, defacing walls and briefly detaining six staff members in what appeared to be a state-sponsored protest against Britain’s tough new economic sanctions against Iran.

The attack was the most serious diplomatic breach since the traumatic assault on the American Embassy after Iran’s Islamic Revolution in 1979.

This story was posted in The New York Times early yesterday morning...and has undergone a complete re-write, plus a title change since I read it yesterday morning...but the message is still the same. It's well worth reading...and I thank Roy Stephens for sharing it with us. The link is here.

View full GSD edition

Hyperinflation: Milos Dedovic, Serbian-American Chamber of Commerce

Here's a video interview that was posted in yesterday's edition of Conversations with Casey. This week David Galland interviews the above mentioned gentleman. Having experienced hyperinflation in Yugoslavia while growing up, Milos provide some perspective on the U.S. debt situation...and its debt trajectory. I've already watched it...and it's well worth your time. You can watch the video, or read the transcript...and the link to both is here.

View full GSD edition

Of Imminent Defaults And Self Deception - Kyle Bass Prepares For The Worst

In his latest letter to LPs, Kyle Bass of Hayman Capital Management, offers his tell-tale clarity on what may lie ahead for Europe and Japan. With his over-arching thesis of debt saturation becoming more plain to see around every corner, Bass bundles the simple (and somewhat unarguable) facts of quantitative analysis with a qualitative perspective on the cruel self-deception that we all see and read every day about Europe.

"Whether it is Kahneman's "availability heuristic" (wherein participants assess the probability of an event based on whether relevant examples are cognitively "available"), the Pavlovian pro-cyclicality of thought, or the extraordinary delusions of groupthink, investors in today's sovereign debt markets can't seem to envision the consequences of a default."

His Japanese scenario is no less convicted, as we have discussed a number of times, with the accelerant of this debt-bomb being the very-same European debacle and his time-frame for this is set to begin in the next few months.

I cut and paste the above introduction from a zerohedge.com posting last night. I thank Australian reader Wesley Legrand for sharing this with us. It's a long read, but Kyle is a pretty bright guy...and I suggest it's worth your time. The link to the 20-page letter is here.

View full GSD edition

Audio Interview with Dr. Marc Faber: King World News

I ran the blog of this interview in my column yesterday. Eric sent me the full audio interview in the wee hours of this morning. I haven't listened to it yet, but I'll certainly will be sometime today. The link is here.

View full GSD edition

Rick Rule: Fed Bailout of Europe Sends Gold Soaring

Certainly it extends the day of reckoning and I guess the game that everybody is involved in is kicking the can down the road. The ultimate question, of course, is what happens when the lender of last resort goes broke? I think that was the question the Europeans found themselves confronted with last week when the Germans, who were regarded as Europe's lender of last resort, had a failed bond auction.

As a consequence of superior American technology, that superior American technology is, of course, counterfeiting...we were able to counterfeit US dollars. The Bundesbank, being a sovereign German ban, can't counterfeit euros. This meant that the Europeans had to search out that superior American fraud. Truly a strange day in the world economy."

The link to the rest of this King World News blog is here.

View full GSD edition

Diary of a Private Investor: 'Why I am buying gold'

As the eurozone lurches towards total destruction, James Bartholomew goes against his initial instincts and decides to put his faith in a little gold.

Interest rate some of the eurozone countries have to pay on new borrowing has been soaring. That, in turn, means that the danger of default has risen. Many banks have lent money to them and are therefore in danger of going bust, too. I have been struggling to find a happy ending to this story. I just can't see it. No reward for me, then, and I can't see how Britain can avoid feeling the blast if, or when, it all blows apart.

Depressed by thoughts of this sort, I have resorted – despite loathing to do this – to buying a little gold. I have resisted this for months. Gold has already risen massively. It would be awful to buy at the very top of its bull market. Gold brings in no income whereas many shares currently have extremely attractive dividend yields. And yet, if we really are facing a potential meltdown of the eurozone, I felt a tiny bit of insurance would be reassuring.

This story showed up in the 'Personal Finance' section of The Telegraph yesterday...and even though the writer is a bit nervous about his purchase, it's people like him that represent the thin edge of the wedge that is getting thicker as time marches on.

This is Roy Stephens final offering of the day...and the link is here. The imbedded photo is worth the trip on its own.

View full GSD edition

Morgan Stanley says prefers gold, silver in 2012

Morgan Stanley said it prefers exposure to gold, silver and livestock in the coming year, as such commodities perform well in a global economic slowdown.

The bank's economists expect global GDP to grow by a mere 3.5 percent in 2012, down from its prior forecast of 3.8 percent, with the first half of the year seen as particularly weak.

"Given the low growth environment, we do not feel it is prudent to be long on the commodity complex indiscriminately," analysts Hussein Allidina and Peter Richardson said in a research note dated Tuesday, November 29th.

This Reuters piece was sent to me by West Virginia reader Elliot Simon yesterday...and the link is here.

View full GSD edition

Atlas was permitted the opinion that he was at liberty, if he wished, to drop the Earth and creep away; but his opinion was all he was permitted. - Franz Kafka

I was hoping that maybe part of gold and silver's big spike up might have involved short covering. There may have been some of that, but it's hard to tell from the preliminary numbers...and I was happy to see that they weren't any higher than they were. I'm mildly encouraged by that.

There also could have been quite a bit of profit taking by the small Commercial traders...Ted Butler's raptors...but the daily open interest report from the CME is a pretty blunt instrument, so it's really hard to tell.

Since all this action occurred on a Wednesday, it won't be in tomorrow's Commitment of Traders Report...so we'll have to wait until the COT report on December 10th to get a better idea. But next Friday is an eternity away...and events in the precious metals world between now and then could pretty much bury what happened yesterday.

I was more than happy to see the excellent performance of the shares. Yesterday's gain in the HUI was pretty much the biggest 1-day advance in percentage terms that I can remember. I hope its a sign of things to come.

The other thing that I've got one eye on is the fact that we're about 10% away from the HUI's old high that was set back in early September...and still about 10% below gold's all time high during the same period. If the shares continue to outperform the metal itself...and there's no reason that they shouldn't, unless nefarious forces are at work there as well...then we should take out the HUI's old highs long before we set a new nominal high price in gold.

I note that after yesterday's price action, gold has now broken through its 50-day moving average...and silver just poked its nose above its 50-day moving average. It will be interesting to see how this all plays out [or is allowed to play out] now that we're trading in a new month.

It was a very quiet trading session in the Far East earlier today...and not much happened when London first opened for the day, either. I get the impression from the price action and the volume, that the bullion banks were not out and about. Then, about 9:30 a.m. GMT...4:30 a.m. Eastern...a buyer of some significance showed up in both silver and gold...and both metals are now above their Wednesday closing prices in New York...especially silver. Gold volume is starting to pick up pretty good...and silver's volume is still not available.

I haven't the foggiest idea of how the rest of the trading day will turn out. How these budding rallies resolve themselves in the minutes and hours ahead is entirely up to JPMorgan et al. If they assume the role of short sellers of last resort as they've always done in the past, these rallies will end in the same old way. But if they put their hands in their pockets and do nothing, then the sky's the limit...literally. It could be another very interesting trading day in New York...and I await the Comex open with great interest.

See you on Friday.