What a day it was on Friday!

Gold did virtually nothing all through Far East trading, but began to develop a positive bias starting at 10:00 a.m. local time in London...which was 5:00 a.m. Eastern. This bias gained more traction the moment that London p.m. fix was in at 10:00 in New York.

Then at 12:00 noon, the gold rally really picked up steam...with the high of the day [$1,570.60 spot] coming about 2:40 p.m. Eastern in electronic trading...before getting sold off a hair going into the 5:15 p.m. New York close. Volume was not overly heavy...and I'm hoping that some of Friday's price action was short covering.

Silver's price action, up until the Comex open in New York, was the same as gold's. From there, everything changed. I was as surprised as you were that silver's price action did not mirror gold, or the other two precious metals. I would give a day's pay to see who went long and who went short during Friday's New York trading session...as I'm sure it would be an education. And I would also bet serious coin that JPMorgan was at the centre of it. Ted Butler thinks so, as well.

But, whatever happened, I'm not the slightest bit worried about it...as you will find out further down in this column when I discuss Friday's Commitment of Traders Report...and I hope you were out there buying this dip. I was.

The dollar didn't do much of anything on Friday. It opened a hair over 73.10...dipped about 15 basis points below 73.00...and then rallied into the close of the New York trading day a hair above 73.00. Nothing to see here, folks.

The gold shares didn't do a lot in morning trading in New York, because the gold price at that point was basically unchanged from Thursday's close. But the rally that began at noon, changed all that. The stocks did just OK...following the gold price rally pretty much tick for tick. But it was rather subdued...and you'd never know that gold set a new record high price yesterday, as the HUI finished the Friday trading session up only 1.64%.

Silver was the only one of the four precious metals to do poorly...and that's only because the bullion banks were foolin' with the silver market again yesterday...as they've been doing for that last couple of weeks. Gold was up 1.95%...platinum up 2.02%...palladium was up 2.20%...and silver was sucking wind...down 1.11%

Here's the 4-day HUI chart for the week that was.

With the odd exception, the silver shares stunk up the place again yesterday. This isn't entirely surprising considering the silver price action vs. the gold price action. It was another day of weak hands selling into strong hands.

Here's Nick Laird's "Silver Sentiment Index" updated as of yesterday's close...and it's nowhere near its old highs.

I got a big surprise when I checked the CME's Daily Delivery Report Friday evening. Yesterday I mentioned that 19 gold and 6 silver contracts had been posted late Thursday night for delivery on Monday, May 2nd...and that this was an error, as it should have been shown as a delivery on Friday.

But as it turned out, those numbers in the previous paragraph, were the deliveries on First Day Notice! This was another shocker. The gold number is no surprise, because May is not a traditional delivery month in gold...but it is for silver...and only six [6] silver contracts were posted for delivery. This is how the March delivery month in silver started out. Normally there's a big rush to deliver in the first two or three days of the delivery month, because there's no benefit to the shorts to hold back on deliveries to the longs.

This is the second delivery month in a row that this has happened in silver. What it means is not know to us at the moment...but it's highly unusual...and it's as far from normal as you can get.

The CME's Daily Delivery Report posted on Friday evening showed that one [1] gold, along with 4 silver contracts were posted for delivery on Tuesday...and that's the point where I found out that Thursday evening's Delivery Report was the First Day Notice report.

So, in two delivery reports for the May contract in silver, a grand total of 10 silver contracts have been posted for delivery out the 1,502 that the CME's preliminary report shows still open for May.

There were no reported changes in GLD...but over at SLV another 1,024,480 troy ounces were withdrawn by an authorized participant because it was needed elsewhere.

The U.S. Mint had a sales report yesterday...and probably the last one of the month, although they might have a final update on Monday. Their report yesterday showed that they sold another 1,500 ounces of gold eagles...500 ounces of one-ounce 24K gold buffaloes...and no more silver eagles. The total sales figures for the month [subject to revision on Monday] stands at 108,000 ounces of gold eagles...20,500 one-ounce 24K gold buffaloes...and 2,819,000 silver eagles.

The Comex-approved depositories showed that they received no silver on Thursday...and shipped 121,147 troy ounces of the stuff out the door. The link to that action is here.

Yesterday's Commitment of Traders Report [for positions held at the end of trading on Tuesday, April 26th] was shockingly bullish for both metals.

In silver, the Commercial net short position shrank by a whopping 10,158 contracts...50.8 million ounces...possibly the biggest one-week decline in open interest in silver, ever. Ted says that it was mostly the '4 or less' traders [read JPMorgan] and the raptors [the '8 or more' small traders in the Commercial category that were covering short positions and/or going long.

The Commercial net short position in silver is now down to 212.7 million ounces...down the above 50.8 million from the previous week. The '4 or less' bullion banks' short position has declined all the way down to 182.0 million ounces...and the '8 or less' bullion banks are short 227.9 million ounces. The '8 or less' traders include the '4 or less'...so you can do the math and figure out how many ounces the '5 through 8' traders are short on their own...and it's not a lot.

If you extrapolate the 10,000 or so contract decline in silver's open interest that's been reported on Wednesday and Thursday...it's obvious that JPMorgan et al are running for the hills as fast their bandy little legs will carry them.

Gold's open interest changes were another big surprise...as the Commercial net short position fell a huge 17,554 contracts...or 1,755,400 ounces of gold. The Commercial net short position, which I mentioned the other day had been climbing since the first week of February, is down to 24.9 million ounces...and has declined further since Tuesday's cut-off for yesterday's COT report.

The '4 or less' bullion banks are short 16.0 million ounces of gold...and the '8 or less' bullion banks are short 23.2 million ounces.

Here's Ted Butler's now famous "Days to Cover Short Positions" chart updated with yesterday's COT numbers...and it's a joy to behold. Here's the link to my Saturday column from April 16th, so you can compare one graph to the other and see the two week change for yourself...and it's quite obvious in silver.

Because of the Easter long weekend, I didn't have a column last Saturday...so I have more than the usual number of stories for you today...and I hope you have the time to give them the attention that they deserve. Most of the precious metal stories I have are silver-related...which should be no surprise to you.

¤ Critical Reads

Europe Probes Goldman Sachs, JPMorgan, Investment Banks Over Default Swaps

Washington state reader S.A. sent along this Bloomberg story that was posted yesterday afternoon...and the contents should be no surprise to anybody. Here are two companies that should have been allowed to go bankrupt...and their respective CEOs should be in jail for life.

Goldman Sachs Group Inc., JPMorgan Chase & Co...and 14 other investment banks face the first-ever European Union antitrust probes into the swaps market, following investigations by U.S. regulators. The link to the story is here.

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How Goldman Sachs Created the Food Crisis

Don't blame American appetites, rising oil prices, or genetically modified crops for rising food prices. Wall Street's at fault for the spiraling cost of food.

For just under a decade, the Goldman Sachs Commodity Index [GSCI] remained a relatively static investment vehicle, as bankers remained more interested in risk and collateralized debt than in anything that could be literally sowed or reaped. Then, in 1999, the Commodities Futures Trading Commission deregulated futures markets. All of a sudden, bankers could take as large a position in grains as they liked, an opportunity that had, since the Great Depression, only been available to those who actually had something to do with the production of our food.

And the rest, as they say, is history. This 2-page essay, posted on Wednesday at foreignpolicy.com, was sent to me by reader Bob Fitzwilson...and is well worth your time. The link is here.

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King World News Interview with Chris Whalen

Jim Rickards call Chris Whalen the 'best banking analyst in the world'...and this audio interview is certainly proof of that. The arbitrage between gold and paper is discussed at the end of the interview. This is certainly worth listening to...as he dissects and bisects the FOMC meeting and Bernanke's speech as well. The link is here.

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Sandy Springs, Georgia: The City that Outsourced Everything

Just when you thought that every place in the United States was going down the drain...comes this wonderful story from Sandy Springs in Georgia that shows just what can happen when the citizens really decide to make a change from the old ways. It's living, breathing proof that the South will rise again!

This youtube.com video runs 7:53...and is certainly worth your time. I thank Roy Stephens...and the link is here.

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Inflation Speeds Up In Europe Forcing Trichet To Strike Again

Early estimates for April eurozone inflation came out ahead of expectations, with the region's CPI rising to 2.8%, according to Eurostat.

More alarming, it's all about the continent's biggest economic powers, and we don't just mean Germany. Inflation picked up in Spain and Italy, two of the eurozone's biggest economies, rising 0.2% to 3.5% and 3.0%, respectively.

Will this force European interest rates higher once again? I thank reader 'David in California' for this story posted over at businessinsider.com...and the link is here.

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The New Cold War

Here's one of the essay's that I've been saving for a Saturday column. This one was posted in The Wall Street Journal on April 16th...and was sent to me by Washington state reader S.A.

There has long been bad blood between Iran and Saudi Arabia, but popular protests across the Middle East now threaten to turn the rivalry into a tense and dangerous regional divide.

This new Middle East cold war comes complete with its own spy-versus-spy intrigues, disinformation campaigns, shadowy proxy forces, supercharged state rhetoric—and very high stakes.

"The cold war is a reality," says one senior Saudi official. "Iran is looking to expand its influence. This instability over the last few months means that we don't have the luxury of sitting back and watching events unfold."

This is deep background material on what's going on under the hood in the Middle East that you don't normally hear about every day. The link is here.

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Walker's World: Turkey's new Sultan

While we're in that part of the world, here's a UPI story that was sent to me about ten days ago by reader Roy Stephens...and in some ways, it's even more interesting than the previous WSJ piece.

Although a loyal NATO ally for 60 years, Turkey has alarmed U.S. officials by its refusal to allow U.S. troops through its territory in the Iraq war and by its increasingly hostile stance toward Israel and its warming relations with Iran. The issue of Turkey's relationship with the West is seen to pivot on the vexed issue of Turkey's application to join the European Union, where negotiations have virtually stalled.

Some key EU countries, notably Germany, France and Austria, have made no secret of their reluctance to admit a largely Islamic Turkey to their traditionally Christian club, even though Europe's sluggish economy could benefit from Turkey's markets and workforce. The Turks themselves are losing patience, with opinion polls in favor of joining the EU dropping from more than 70 percent support in 2003 to less than 40 percent today.

If you want to learn more about Turkey's history, no better book can be found than David Fromkin's classic tome A Peace to End All Peace: The Fall of the Ottoman Empire and the Creation of the Modern Middle East...and you can read about it here.

The link to the UPI story is here.

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Brussels' Fear of the True Finns: Rise of Populist Parties Pushes Europe to the Right

Here's another Roy Stephens offering...this one from earlier this week...and it's posted over at the German website spiegel.de.

The success of the True Finns in last week's Finnish elections has shocked Brussels. They are just one of a number of right-wing populist parties currently flourishing in Europe. Their rise could threaten the euro bailout.

Like Iceland, the Finns aren't going to put up with the EU or the IMF's demands to bail out all of Europe. This is another 2-page essay which, in my humble opinion, deserves your time...and the link is here.

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Jim Rickards Interview on King World News

Here's an audio interview that Eric slid into my in-box in the wee hours of this morning. As you know, I have all the time in the world for whatever Jim has to say. I haven't listened to it yet, but Eric says that the gold market is discussed towards the end of the interview...but I'd bet that the rest of the interview is a must listen as well...and the link is here.

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Gold-Buying Central Bankers May Extend Record Rally

Here's a Bloomberg piece from yesterday that reader Rob Bentley was kind enough to send my way yesterday.

Central banks that were net sellers of gold a decade ago are buying the precious metal to reduce their reliance on the dollar as a reserve currency, signaling demand that may extend a record rally in prices.

As developing countries accelerate purchases, gold may reach $2,000 an ounce this year, compared with a record of $1,569.80 today in New York, said Robert McEwen, the chief executive officer of producer U.S. Gold Corp. Euro Pacific Capital’s Michael Pento, who correctly predicted gold’s highs for the past two years, forecasts a 2011 high of $1,600.

It's worth the read...and the link is here.

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Silver on fire in India

Sensing a price hike, investors in India are hoarding up on the white metal. With demand expected to jump by 10% to 15% from the current level of about 3,000 tonnes a year.

Despite a 100% jump in price in just over six months from October 2010, demand for the silver metal refuses to die in India.

This story, filed from Mumbai yesterday, is posted over at mineweb.com...and I thank reader 'David in California' for sharing it with us. It's a must read...and the link is here.

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Gold Rally is Thumbs Down for Bernanke: Rick Santelli

Here's a King World News interview that Eric sent me yesterday...and I'm just going to steal Chris Powell's preamble from the GATA release on this story..."CNBC editor Rick Santelli told King World News yesterday that rising gold and silver prices are repudiating the Federal Reserve and its policy of infinite money and debt. The link to this short blog is here.

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No silver lining left for users of the metal

Here's a story from Thursday's edition of The Wall Street Journal that Washington state reader S.A. sent me yesterday. It was subscriber protected, but I sent it to Chris Powell, who fixed that situation in short order by posting it in the clear as a GATA release.

Silver investors are smiling about this year's rally in the price of the precious metal, now closing in on an all-time high. But silver's surge is hurting major users and even a few miners, including some blindsided by the relentless climb.

The miners that got blind-sided are the ones that were stupid enough to sell forward future production, because they really don't understand the market fundamentals of the product they are mining. As a group [and there are exceptions], the guys and girls that run the silver mines that we own shares in, aren't the sharpest knives in the drawer...and get easily sweet-talked into this sort of financial black hole by any passing bullion bank...and JPMorgan comes to mind immediately.

The GATA release doesn't contain all the nifty graphs and charts that the original WSJ story had...but it's worth the read anyway...and the link is here.

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Silver: Much Higher Margins Ahead for CME?

Here's another silver-related story that showed up on cnbc.com yesterday...and I thank West Virginia reader Elliot Simon for sending it along.

In what could be a precursor to much higher margins at the Chicago Mercantile Exchange, MF Global on Friday raised its margins on one contract of silver from $14,513 to $25,397, an increase of 175 percent.

The purpose of increasing margins would be to keep both long and short investors from adding to positions in what has become an increasingly volatile market.

This is a must read...and the link is here.

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Jim Sinclair will speak at GATA's Gold Rush 2011 conference in London

Here's a shameless plug for GATA's London gold conference on August 4-6th in London. We have a whole raft of speakers...Eric Sprott, John Embry and Jim Rickards are three of many that will be in attendance...along with Jim Sinclair.

The contents of this GATA release is worth the read anyway, even if you don't plan on going to the conference...and the link is here.

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Not enough lifeboats as the major currencies fall: Murray Pollitt

Murray Pollitt of the brokerage firm Pollitt & Co. in Toronto writes the following..."The time is rapidly approaching when the collective exodus from the big three currencies begins in earnest. In the past these guys have supported each other, but there is nobody to support all three. When the exodus happens, it will be far more dramatic than the Asian meltdown a decade ago."

The rest of Chris Powell's preamble...along with the link to the story itself...is imbedded in this GATA release...and the link to this must read article is here.

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You'll know it's time to sell your gold positions when you see this...

I have a very unusual musical selection for you today, which you certainly can't consider to be a 'blast from the past'. When reader Roy Stephens sent me this ted.com video two weeks back...I came close to hitting the 'delete' button before I was a minute into it, as I have little time for contemporary classical music. I had more than my fill of it from various 'composers in residence' when I was on the board of the Edmonton Symphony Orchestra.

If this video doesn't give you chills...or bring a tear to your eye...well, you're just not human enough...and I'll send the Men in Black to pick you up. This is the first time I've seen a TED crowd give a standing ovation to a speaker...as the emotion in the room was palpable. As one poster put it..."send this into deep space, as this is the voice of the Earth"...and it is. This 14:15 video clip is a must watch/listen...so turn up your speakers and then click here.

Considering the size of the gold rally yesterday, the volume...net of all roll-overs...was just a bit under 150,000 contracts, which wasn't a lot. The preliminary open interest number was a very small 4,704 contracts. I'm hoping that means that we'll see another decline in open interest...and if that is indeed the case, that means that a lot of yesterday's rally involved short covering by the bullion banks. That won't be known until late Monday morning when the CME posts the final o.i. numbers.

Thursday's final open interest number showed another healthy decline in gold's open interest...down 5,174 contracts. This was not at all surprising, as the preliminary Thursday o.i. number showed a very small o.i. increase of only 1,685 contracts. In yesterday's column I said that this "bodes well for a big decline in gold's open interest in the CME's report later this [Friday] morning"...and indeed it did.

Silver's volume was pretty decent...just under 85,000 contracts net. But the preliminary open interest number was up a fairly chunky 5,451 contracts. Based on the rather surprising price decline, I'd like to think that somebody was actually going short on Friday...or maybe the raptors were selling their newly purchased long positions...but this won't be known until Monday morning.

Silver's final open interest on Thursday was a shocker...as it showed a decline of 6,132 contracts. I knew from the preliminary o.i. number on Thursday that there was going to be a big drop, but this was even bigger than I suspected it would be...and proves without doubt that the bullion banks have "found religion" [as Ted Butler said yesterday] and are getting out of Dodge. That's why I'm more than interested in what Friday's final o.i. number shows on Monday.

As I mentioned earlier, May open interest in silver is already down to a very small 1,502 contracts...and, as I pointed above, only ten of these contracts were posted for delivery on Monday and Tuesday of next week. One has to wonder why the shorts are so reluctant to deliver to the longs.

The backwardation situation in silver changed a bit yesterday...as the spreads tightened in a penny or so in the near months...and the backwardation out to the December 2015 delivery month is almost ninety cents. This is getting interesting once again...especially now that the bullion banks are obviously heading for cover.

Here's a comment from Ted's Wednesday letter to clients. I think I've posted this already, however I'm too tired to remember at this time of morning...but if I have, it's worth repeating again now that yesterday's COT report has revealed what it has.

"Therefore, what had previously been a not too bad COT set-up in silver just got a lot better because of the sell-off. Certainly, there is a limit as to how many leveraged speculators can be flushed from the market on these engineered take downs. My sense is that we have witnessed most, if not all, of the potential speculative long liquidation already. There wasn’t a tremendous amount of speculative long silver fruit on the tree going into the sell-off, and after the commercials shook it good and hard these past few days, there’s a lot less left to still be shaken off. As always, when the commercials can’t force any further speculative long liquidation that marks a price bottom. Friday’s COT Report should be quite instructive and I will cover it in the weekly review."

As Ted mentioned on the phone yesterday, once all the technical fund longs have been blown out of their positions by the recent downside price manipulation, the only way the bullion banks can cover from hereon in, is by covering to the upside.

I consider Friday to be a transition day for silver...and I'm more than curious as to what went on behind the scenes in the Comex futures market yesterday.

There's still the possibility that the bullion banks may blast gold to the downside one more time, to get one more shot at the silver shorts...but, regardless of that, the price management scheme by the bullion banks in both the silver and gold markets, is obviously on its last legs. From this day forward, all price bets are off.

Without doubt, the internal structure of the silver market is the best it's been in years...and this is with the current silver price bumping up against its all-time high price. Any price surprises should be to the upside. I await silver analyst Ted Butler's weekly review tomorrow afternoon with great interest...and I will steal what I can for my Tuesday column.

Here's the 3-year silver chart one more time. It's hard to believe that the COT shows that silver is 'locked and loaded' for a big move to the upside with a chart that looks like this...but this is what the numbers are showing.

And, one last time, this is your last chance to order the CD set of this weekend's Casey Research conference at the discount price of $295, because after the conference is concluded on May 1st...the price rises to $395.

You can read all about it by clicking here...which I urge you to do, as the line-up of speakers is impressive by anyone's standards.

I am oh so happy to be 'all in' this market...and I wouldn't want to be sitting on the sidelines for all the tea in China at the moment.

I hope you enjoy the rest of your weekend...and I'll see you right here on Tuesday morning and I should have lots to talk about.

I'm off to bed.