• Yesterday In Gold And Silver
• Critical Reads
• The Funnies
• The Wrap

YESTERDAY IN GOLD AND SILVER

Well, what excitement there was at the London open on Tuesday morning, vanished shortly after the London a.m. gold fix was in at 10:30 a.m. local time. From there, gold began a slow decline that lasted until the FOMC meeting ended at 2:15 p.m. Eastern. The news from that caused gold to spike up over $20 during the next few hours... and the bullion banks had to throw a fair amount of paper at it to prevent it from blasting through $1,300 spot. As it was, gold hit a new high price [$1,292.00 spot] during electronic trading in New York yesterday.

Tuesday's silver price action looked very similar to gold's... with silver blasting through $21 shortly before 4:00 p.m. yesterday afternoon... and it took a bit of work for 'da boyz' to get the price back under the $21 mark before electronic trading closed at 5:15 p.m. in New York, but they did it.

Well, the story yesterday was all about the world's reserve currency's reaction to the news from the FOMC meeting yesterday afternoon... and it did not take the news well. The dollar fell off a cliff... and the precious metals prices responded accordingly. The dollar weakness is also continuing into Wednesday trading in the Far East as I write this paragraph. The dollar graph below tells all.

The precious metal shares, which had been in negative territory all day, responded as expected to the jump in gold and silver prices...and the HUI managed to close up 0.61% by the end of Tuesday trading.

Well, the CME Delivery Report was a big surprise yesterday. Only 30 gold Comex contracts were posted for delivery on Thursday... but a real chunky 484 silver contracts were also posted for delivery on the same day. Except for HSBC USA, all the big bullion bank names were there as issuers and stoppers. JPMorgan received a whopping 339 silver contracts in their proprietary trading account. The report is well worth looking at... and the link is here.

And the silver surprises just kept on coming yesterday. The GLD ETF reported a smallish withdrawal of 9,771 ounces, which was probably a fee payment of some sort... but, over at the SLV ETF, they reported receiving a monstrous 4,109,397 troy ounces of silver! I'm pretty sure that's a one-day record receipt for that ETF.

Nick Laird over at sharelynx.com was kind enough to send me the updated graph for the SLV ETF. You'll note that the 128 tonnes of silver they took in yesterday, barely registers as an up-tick on this chart.

I reported on last week's happenings over at the Zürcher Kantonalbank in Switzerland in my column yesterday... but that information was added about two hours after it was first posted, so some of you early birds may have missed that... so here it is again. They reported adding 23,860 ounces of gold and 809,074 ounces of silver to their respective gold and silver ETFs last week.

The U.S. Mint had a small sales report yesterday. They sold another 10,000 ounces of gold in their gold eagle program, bringing it up to 53,000 ounces for September so far. We are miles ahead of August's poor sales numbers in gold eagles already.

Over at the Comex-approved depositories, they reported a net decline in their silver inventories on Monday. This time it was 553,438 troy ounces. The link to that activity is here.

¤ Critical Reads

Inflate, or die!

The story of the day yesterday had to do with the world's reserve currency and Q.E. 2 that's coming up. The first story on that was posted yesterday afternoon in the Los Angeles Times. The headline reads "Dollar sinks and gold soars as Fed signals it wants to stoke inflation". The markets’ verdict was clear: They believe Fed Chairman Bernanke is willing to debase the dollar to avoid the risk of the economy falling into deflation. As I [and others] have said many times, dear reader... it's "Inflate, or die!" The link to this story is here.

QE2 in round Trillions

It didn't take Ambrose Evans-Pritchard long to get his oars in the water on the dollar, as this one was posted on Monday, the day before the FOMC meeting wound up.. Here's the story courtesy of Washington state reader S.A. The headline reads "QE2 in round Trillions". It's not a big read... but it's a must read... and the link is here.

1-year dollar chart

Before leaving the dollar story behind today... here's the 1-year dollar chart up close and personal. From a technical point of view, once the world's reserve currency fall below 80 cents... the next juicy dollar target looks like 74 cents. One wonders how much foreign currency will be spent making sure that doesn't happen. In the light of this, it makes the Bank of Japan's decision to debase its currency last week look like a total waste of time... and yen.

Payrolls Decrease in 36 U.S. States, Led by Michigan

Despite the fact that the recession in the U.S. has been 'officially' declared as being over [tee hee!]... the bad news just keeps pouring in. Here's a Bloomberg piece that was sent to me by Casey Research's own John Grandits. The headline reads "Payrolls Decrease in 36 U.S. States, Led by Michigan". Joblessness climbed in 27 states, with Nevada reaching a record 14.4 percent rate, the highest in the nation. The link to the story is here.

Bell Tolls for Officials in California Pay Scandal

The next story is from yesterday's edition of The Wall Street Journal. It's Washington state reader S.A.'s second contribution to today's column. The headline reads "Bell Tolls for Officials in California Pay Scandal". Authorities arrested the mayor and most city-council members on Tuesday in Bell, California, charging them and former officials with defrauding constituents of $5.5 million in outsized salaries and perks. A battering ram was used to enter the house of Mayor Oscar Hernandez, who was "a little slow" in answering the door. So it's not just Wall Street that's screwing the American taxpayer. You can't make this stuff up... and the link is here.

The Paycheck Cycle

Here's a short and very disturbing article that was sent to me late last night by Australian reader Wesley Legrand. It's a story posted over at the financialarmageddon.com website... and bears the headline "The Paycheck Cycle". The story contains a post from The Wall Street Journal's Real-Time Economics blog headlined "Watching Wal-Mart at Midnight". It suggests that a growing number of Americans are having to cope with an even more depressing reality. This is a very short piece, but it's a must read... and the link is here.

Vatican Bank Facing Money Laundering Probe

Washington state reader S.A. sent me another article yesterday... one about the Italian police probe of Vatican bank officials. However, I'm going to run the story that reader 'David in California' sent me on this same issue, as I consider it to be a more in-depth piece. It's from the huffingtonpost.com website... and the headline reads "Vatican Bank Facing Money Laundering Probe". One would think that "God's bankers" would be above this sort of thing... but the stories I've heard [and read] about what goes on there, would curl your hair. This is well worth the read... and the link is here.

Whose Money is it Anyway?

If my American readers think that the IRS uses draconian measures, it's nothing compared to what Her Majesty's Revenue and Customs agency of the United Kingdom may have in store for its citizens if the current reforms to the tax system actually becomes law. Under this new plan, an employer would send an employee’s gross earnings to HMRC, which would then deduct the appropriate taxes and remit the balance to the employee — all done electronically, of course. George Orwell would be proud. I thank Casey Research's own Shannara Johnson for alerting me to this story... which is headlined "Whose Money is it Anyway?". It's posted over at thenewamerican.com website... and the link is here.

Gold Market Update

My last four stories are all gold related. The first one was sent to me by Australian reader Wesley Legrand. It's a rather longish article by Clive Maund headlined "Gold Market Update" dated Sunday, September 19th... and posted at the safehaven.com website. There are lots of great graphs along with excellent commentary to go with it... and it's well worth your time. The link is here.

Silver Market Update

Clive also has a similar [but far shorter] commentary on silver. It, too, is worth your time... and that link is here.

Alasdair Macleod: Inflection point for gold and the price suppression scheme

Next is a GATA release headlined "Alasdair Macleod: Inflection point for gold and the price suppression scheme". In commentary published yesterday, the economist, former banker, and blogger Alasdair Macleod describes the overwhelming forces bearing down on the Western central bank gold price suppression scheme in an essay titled "Inflection Point". It's a bit of a read... but a must read in every respect... and the link is here.

Market Intelligence officer Jim Rickards

And lastly today... in the first half of a 2-part interview at King World News, market intelligence officer Jim Rickards remarks, among other things, that the job of the Federal Reserve is not its stated one of maintaining price stability but rather to debase the dollar... and that the Central Bank Gold Agreement has broken down. As always, anything Jim Rickards has to say is worth listening to... so it's a must listen from one end to the other... and the link is here.

The world is a dangerous place to live not because of the people who are evil, but because of the people who don't do anything about it. - Albert Einstein

Well, after the comments out of the FOMC meeting yesterday, all bets are off with gold and silver prices. Ted Butler has mentioned several times in commentary to his clients [and to me on the telephone] that someday the Commitment of Traders report and the huge short positions held by the bullion banks in both metals really won't matter as much. I have a strong feeling that that day arrived yesterday.

If you listened to the Jim Rickards interview, he said that more quantative easing will result in runaway inflation... and, ultimately, hyperinflation. I won't argue with that.

I said during the financial crisis of 2008 that the safety catch was off the world's financial system. However, the governments of the world [and their respective central banks] stepped in and prevented that from happening. The next time we have a crisis like that, we won't be as lucky. With the "Quantative Easing 2" scenario about to unfold with the Fed, it's a pretty fair bet that economic, financial and monetary destruction is in the final chapter.

Volume in gold yesterday was extremely heavy... with silver's volume pretty chunky as well. I'll be really interested in the open interest numbers when they're posted later this morning. You will note that, once again, all this action happened on a Tuesday... the cut-off day for Friday's Commitment of Traders report. Will all of yesterday's activity be reported in a timely manner?

I note that silver open interest for September is now down to 732 contracts. I'm not sure if the 484 contracts that were put up for delivery in yesterday's CME report have been removed from that number. I would guess not... but today's CME report should clarify that situation.

In Wednesday trading in the Far East and in early London action... volume in both metals is much heavier than it was this time yesterday morning. The prices of both gold and silver are a hair higher as of 4:47 a.m. Eastern time, but it's obvious that there's a bigger battle going on behind the scenes than the price activity indicates.

I wouldn't hazard a guess as to what will happen in the New York market once gold and silver trading begins there at 8:20 a.m. Eastern time... but we'll find out soon enough.

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