The gold price didn't do much until around 10:00 a.m. in London trading. Then it got sold off a bit over ten bucks, with the low coming at precisely noon...which is 7:00 a.m. Eastern.

From there, a rally ensued that continue right into the close of electronic trading in New York at 5:15 p.m. yesterday afternoon. Gold closed back above $1,600 spot...and right on its high of the day. Volume was very decent.

The silver price followed pretty much the same price pattern as gold...but silver's low came during the Comex trading session, around 9:35 a.m. Eastern time. From there, silver rallied strongly and closed in the New York Access Market almost on its high of the day. Volume was heavy once again.

The U.S. dollar opened slightly above the 75 cent level...and closed Wednesday around the 74.80 mark...down about 30 basis points on the day.

The gold stocks gapped down at the open yesterday, but immediately headed higher...reaching their peak shortly after 11:00 a.m. in New York. From there, the HUI basically traded sideways for the rest of the day...and despite the nice gain in the gold price, the HUI only finished up 0.88%.

Most of the silver stocks had a much better day than that...and Nick Laird's Silver Sentiment Index was up 1.73%.

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The CME's Daily Delivery Report showed that only 29 silver contracts were posted for delivery on Friday. The biggest issuer/short was Barclays with 26 contracts...and the two biggest stoppers/longs were the Bank of Nova Scotia [20 contracts]...and JPMorgan [7 contracts]. The link to this action is here.

There was no reported change in GLD yesterday. But, surprisingly enough...1,949,124 ounces of silver were reported withdrawn from SLV yesterday...the day after they received 6.1 million ounces of the stuff.

The U.S Mint had a smallish sales report yesterday. The sold another 6,500 ounces of gold eagles...bringing their monthly total up 31,500 ounces.

There was a fair amount of action over at the Comex-approved depositories on Tuesday. They reported receiving 1,229,905 ounces of silver...and shipped 629,754 ounces out the door as well. The link is here.

Since yesterday was the 20th of the month, The Central Bank of the Russian Federation posted its previous month's gold purchases. In June, they added another 200,000 ounces of gold to their reserves...which are now up to 26.9 million troy ounces. Nick Laird's excellent graph tells all.

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Silver analyst Ted Butler had his bi-weekly commentary to his subscribers yesterday...and here are a couple of paragraphs that I've borrowed from it...

"The short side of silver is extremely concentrated and dominated by big banks and other large financial firms, most of which are also High Frequency Traders. These traders are the kingpins of the market. As such, most of the time they dictate price direction in silver. When prices suddenly swoon, especially when trading conditions are thin, you can be sure these traders are behind that price movement. Hundreds or thousands of smaller silver traders don’t suddenly collude and conspire among themselves to suddenly drop the price. Because the big silver commercials are on the short side, it’s logical that they would influence price sell-offs as that helps their short positions. The concentrated short position and the clear market dominance of these big traders (read JPMorgan) is why I allege that the silver market is manipulated. Please remember that manipulation is the most serious market crime possible."

"More and more people are coming to the conclusion that silver is manipulated. This can be seen in the developing commentary on the Internet, where silver being manipulated has widely come to be accepted as fact, based upon the continuing evidence. But the entity whose opinion matters the most on whether silver is manipulated, the CFTC, has been almost silent on this most important issue. The agency used to come out regularly and deny that the silver market was manipulated, but those denials ceased a few years ago, shortly before Gary Gensler took over as chairman. The agency hasn’t affirmed that silver has been manipulated either, although Commissioner Bart Chilton has said so on a number of occasions, speaking for himself. I sense that the CFTC is starting to see the light, but it hasn’t brought charges yet."

Here are two more nifty graphs...the first one I stole from an article over at Bullion Management Group. The chart shows just how much each of these five major currencies have declined in purchasing power against gold since 2001. Based on this chart, give me one good reason why you should be holding any fiat currencies, instead of physical gold...or silver.

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Here's a chart of Greek 2-year Bond Yields. These are bankruptcy levels...and it matters not what kind of bailout the EU and IMF come up with. The market has spoken...and Greece is toast.

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¤ Critical Reads

Fed fines Wells Fargo $85 million for mortgage abuses

Reader Scott Pluschau sent me this story...and his comment accompanying this article were spot in..."this fine is a joke."

Wells Fargo, the bank holding company based in San Francisco, did not admit to any wrongdoing. The order requires Wells Fargo to compensate borrowers affected by these practices. The bank also agreed to improve the oversight of its home mortgage loan business.

It's a one-paragraph story posted over at marketwatch.com...and it is worth your time. The link is here.

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Germany, France Reach Accord on Greek Bailout

Here's a Reuters story that Roy Stephens sent me late last night.

Germany and France have reached a common position on a second bailout of Greece in their effort to prevent the country's debt crisis from spreading through Europe, officials said on Thursday.

The accord came after seven hours of talks late into Wednesday night between German Chancellor Angela Merkel and French President Nicolas Sarkozy in Berlin, sources in both governments said.

Details of the common position were not revealed, but the French delegation said it would include a contribution to the Greek bailout by Europe's banking sector.

Of course, the devil is always in the details...and I'm sure they will be all over the news services this morning. Not that it makes any difference, as this solution just delays the inevitable. The link to the story is here.

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Doug Casey: The Greater Depression and the International Solution

Here's another first class interview with our own Doug Casey. It's Doug telling you how you can protect yourself from US tyranny.

Foreign exchange controls will almost certainly attempt to keep you and your wealth under US government control, to be plundered. You must go international to diversify away from this mounting political risk. And do not fear: Most other parts of the world are both safer and mellower for you and your family than the empire.

This time it's Lew Rockwell that does the honours...and it's an absolute must listen. The link is here...and it runs a hair over 15 minutes.

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Gold breakout and subsequent trading encouraging - John Hathaway

Tocqueville Gold Fund manager John Hathaway told King World News yesterday that negative interest rates will support gold for a long time, mining shares are showing relative strength and have a lot of catching up to do, and the sustainability of $1,500 gold has been established.

I stole the preamble and the story from Chris Powell's GATA release...and the link is here.

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Gold Is Truth, Unchained CPI Leads To A Dog-Food Diet

Whatever agreement emerges from the backroom dealing, it is now almost sure to include what we’ve labeled a “stealth default” on Social Security.

The White House quietly put out the word two weeks ago that it’s on board. Congressional Republicans think it’s a super idea, too. “There hasn’t been any economist anywhere that says we shouldn’t do that,” says Sen. Tom Coburn (R-Okla.).

Of course, they don’t call it a stealth default. They call it “chained CPI.”

This blog by Addison Wiggins was posted over a forbes.com yesterday...and I thank Roy Stephens for sharing it with us. The link is here.

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Gold’s Recent Rally, Current Valuation And Outlook - Nick Barisheff

Here's a short piece by Nick Barisheff of Bullion Management Group. Here's a paragraph from this article...

"At the beginning of the year, when gold was trading around $1350, I forecast gold would climb to $1700 – $2000 by year end. As we move past the midpoint of the year, we are certainly on track to meet that price range and the economic issues I’ve mentioned only serve to reinforce that target."

It's only a handful of paragraphs...and well worth the read. The link is here.

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China FX custodian wants world to think it won't buy much gold, silver, oil

Here's a Reuters story that showed up in another GATA release yesterday. Chris Powell comments about the headline as follows "... At least not until China has obtained surreptitiously all the gold, silver, and oil it wants."

It's another short piece that's worth your time, if you have it. The link to the story...headlined "China urges U.S. to boost confidence in debt, dollar"...is here.

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Sprott Physical Gold Trust Announces Completion of Its Follow-on Offering of Trust Units

Sprott Physical Gold Trust (NYSE: PHYS / TSX: PHY.U), a trust created to invest and hold substantially all of its assets in physical gold bullion and managed by Sprott Asset Management LP, today announced that it has completed its follow-on offering of 19,000,000 Units at US$14.00 per Unit for gross proceeds of US$266,000,000 (the "Offering").

That adds up to about five tonnes of gold...but there will be around US$40 million more added to that if the underwriters exercise the over-allotment option in full...and I'll bet my last nickel that they'll do exactly that, which will bring the total offering very close to six tonnes of gold when all is said and done.

I thank Washington state reader S.A. for sending me this story yesterday...and the link is here.

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1933 double eagles belong to U.S. government, jury concludes

After about five hours of deliberation after a seven day trial, the two men and eight women said the government proved that when the rare "Double-Eagle" coins ended up in the hands of the late Philadelphia jeweler Israel Swift, they did not get there legitimately.

This is another story I snatched from a GATA release yesterday, but I thank reader Scott Pluschau who first brought the story to my attention...and the link is here. It's well worth the read.

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Gold May Rally to $1,800 as Newedge Forecasts Stronger Haven, Asian Demand

Here's a Bloomberg story from late yesterday that Scott Pluschau sent me in the wee hours of this morning, as I was doing the final edit on this column.

Gold prices will surge to $1,800 an ounce by the end of this year, and silver will soar to $70 an ounce by March as physical demand climbs in Asia and investors seek a haven asset, Newedge USA LLC said.

Newedge is one of the smaller gold traders in the Commercial section of the COT...and falls into Ted Butler's 'raptor' category. The link to the story is here.

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Asia doesn't believe in summer lull for gold, Agnico Eagle CEO says

Agnico Eagle CEO Sean Boyd told King World News yesterday that Asian buyers don't seem to care that gold is supposed to be slow in the summer. Boyd also says gold mining company shares are severely undervalued. An excerpt from the interview has been posted at the KWN website...and the link to the blog [which is well worth the read] is here.

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Time to sell? Wall Street Journal finds cause for higher gold

Fiscal troubles in both Europe and the U.S. may have spurred gold to record highs this week, but the warm embrace of the precious metal appears to be the result of more than one set of incentives.

Swiss bank UBS said that gold, which cracked the $1,600 a troy ounce mark on Monday, will be the only precious metal with a supply deficit this year, as demand outstrips inventory for the first time since 2008.

This must read story appeared in yesterday's edition of The Wall Street Journal...and is published in the clear in this GATA release. The link is here.

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When a country is indebted to the degree that we’re indebted, the country always defaults. We will default because the debt is unsustainable. If we don’t understand this, this default will not be because we don't send out the checks. We will send out the checks. It will be defaulted on because people will get their money back, or they will get their Social Security checks and it won't buy anything. - Ron Paul [R-Texas]...20 July 2011

Gold volume was pretty decent once again yesterday...around 133,000 contracts net of all roll-overs...and the preliminary open interest number showed an increase of 10,505 contracts. I was happy that it was only that much.

The big after-hours smack-down in the gold price on Tuesday afternoon produced a decline in gold's open interest on that day...but only by 608 contracts. Too bad that won't be in tomorrow's Commitment of Traders report...and neither will the corresponding action in the silver market that occurred at the same moment.

Silver's net volume was very heavy once again...in the 62,000 contract range...and the preliminary o.i. number was up 3,564 contracts. Based on the price action, I was happy to see such a small increase, which will certainly be much reduced when the final numbers are posted on the CME's website later this morning.

Silver's final open interest for Tuesday only showed an increase of 681 contracts...which was down quite a bit from the preliminary report. It's impossible to tell from this number what really transpired between the Commercial traders [JPMorgan et al]...and all the other traders in the Non-Commercial and Nonreportable categories of the COT. It will all be in next Friday's COT report...which will be the last one for July.

July open interest in silver is around 300 contracts, once you subtract what was posted for delivery on Friday that I commented on close to the top of this column. All of this open interest has to be dealt with in the next five business days...before first day notice for delivery into the August gold contract next Friday. The deliveries [issuers and stoppers/shorts and longs] between now and then should be interesting to watch.

Although both gold and silver recovered nicely from the beating they took in the thinly-traded New York Access Market on Tuesday afternoon, it's way to soon to say that the worst is over for both metals. I'm always on the lookout for 'in your ear'...and as you've seen from Tuesday's price action, that it can happen at any moment.

Here's the 6-month silver chart...and you can see how the price has been turned over during the last two trading days. The jury is still out on whether we got up or down in price [in both metals] from here. I can make a solid argument for either, so we'll just have to wait out.

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Here's the 6-month gold chart...and it looks very similar to its silver cousin.

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Gold and silver price didn't do a lot in Far East trading, but were both up a hair at the beginning of the London trading day. Then, just like what happened on Tuesday and Wednesday in morning trading in London, the selling began...and both metals headed sharply lower...with silver down over 50 cents as of 3:56 a.m. Eastern time. At the London open, silver was up almost 20 cents. Volume in both metals is getting up there...especially in silver, as the high frequency traders are obviously doing their thing.

The dollar, which had been declining slowly all night, hit its nadir at precisely 3:00 a.m. Eastern...which is the opening of precious metals trading in London. How convenient. But it's hard to say if this trend will continue as the Thursday trading day grinds on. Here's the dollar chart from earlier this morning. As of 5:21 a.m. Eastern time, it was back in positive territory.

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Just as I hit the 'send' button at 5:25 a.m...I note that gold has jumped back up above the $1,600 spot price level. How long that lasts remains to be seen. The silver price didn't recover much at all.

That's all for today...and I await the Comex open with great interest once again.

See you on Friday.