Once again, gold's high came shortly after the London open...and after several attempts to break through $1,600 to the upside, news of some sort of U.S. deficit deal that came during the New York lunch hour, peeled more than fifteen bucks off the price in very short order...with the low the day coming about ten minutes before the close of trading on the Comex.

From that low, gold recovered back to the $1,590 spot level during the electronic trading session that followed. Volume was more than decent.

It was pretty much the same price pattern in silver...except the price was more 'volatile'. At one point, silver was down well over a dollar from Wednesday's close...but closed down 'only' seventy-nine cents on the day. Volume was very heavy once again. And, as is always the case in silver, it was JPMorgan's high frequency traders that were the cause of that huge volume.

For Thursday, gold was down 0.73%...silver was down 1.97%....platinum was up 0.51%...and palladium was up 1.64%

From its open on Wednesday evening in New York, right up until it's precise 3:00 a.m. Eastern time low, the dollar was down a bit over 20 basis points.

The subsequent rally of around 50 basis points came to an end during the London lunch hour, while everyone on the U.S. East Coast was either asleep, or just contemplating get out of bed.

Then the dollar rolled over hard...and by 10:30 a.m. Eastern time, it had lost 100 basis points...one full cent. The anemic recovery that followed rolled over late in the afternoon with the low in the world's reserve currency [around 73.90] coming at 5:00 p.m. Eastern right on the button.

There wasn't a hint of the dollar's waterfall decline anywhere to be found in the gold price yesterday.

Considering the gold price action yesterday, the stocks put in a pretty decent performance...and the big $15 decline in the gold price that began during the New York lunch hour is barely noticeable on the chart below. The HUI finished down a smallish 0.36%.

Since the silver price got hit harder, the stocks reflected that decline...and Nick Laird's Silver Sentiment Index was down 1.33%

(Click on image to enlarge)

The CME's Daily Delivery Report was a quiet one yesterday, as only one lonely silver contract was posted for delivery on Monday.

The GLD ETF reported a decline yesterday...as 107,138 ounces of gold were withdrawn. The SLV ETF headed in the other direction, with an increase of 1,461,807 troy ounces.

The U.S. Mint had another small sales report yesterday. They sold another 4,000 ounces of gold eagles...bringing the monthly total up to 35,500 ounces of gold eagles sold so far this month.

There was more activity over at the Comex-approved depositories on Wednesday, as 618,811 ounces of silver were received...and 126,114 troy ounces were shipped out.

Here's a chart that West Virginia reader Elliot Simon sent me on Wednesday. I was going to post it in yesterday's column, but there just wasn't enough room. It's another reason why commodities in general...and precious metals in particular...are rising in price.

(Click on image to enlarge)

¤ Critical Reads

Consumers Use Credit Cards for Necessities as Inflation Cuts U.S. Incomes

Consumers in the U.S. are increasingly using credit cards to pay for basic necessities as income gains fail to keep pace with rising food and fuel prices. The value of an average transaction on credit cards outpaced the gain for debit cards.

“Consumers, particularly in the lower-income end, are being forced to use their credit cards for everyday spending like gas and food,” said Tavares, who’s based in Atlanta. “That’s because there’s been no other positive catalyst, like an increase in wages, to offset higher prices. It’s a cash-flow problem.”

The swings in purchases of fuel and food have been “dramatic,” Tavares said. The volume of gasoline purchases placed on credit cards jumped 39 percent last month from a year earlier, compared with a 21 percent increase in June 2010, he said. Food shopping increased 5 percent after falling 7 percent last year.

This Bloomberg story, filed late Wednesday night, was sent to me by reader Matthew Nel. It's a must read for sure...and the link is here.

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Curse the Geniuses Who Gave Us Bank of America: Jonathan Weil

Here's an op-ed piece filed over at Bloomberg yesterday. As usual, Jonathan isn't taking any prisoners.

Ask anyone what the most immediate threats to the global financial system are, and the obvious answers would be the European sovereign-debt crisis and the off chance that the U.S. won’t raise its debt ceiling in time to avoid a default. Here’s one to add to the list: the frightening plunge in Bank of America Corp.’s stock price.

At $9.85 a share, down 26 percent this year, Bank of America finished yesterday with a market capitalization of $99.8 billion. That’s an astonishingly low 49 percent of the company’s $205.6 billion book value, or common shareholder equity, as of June 30th. As far as the market is concerned, more than half of the company’s book value is bogus, due to overstated assets, understated liabilities, or some combination of the two.

I thank Washington state reader S.A. for sharing this story with us...and the link is here.

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States negotiating immunity for banks over foreclosures

A coalition of all 50 states' attorneys general has been negotiating settlements with five of the biggest U.S. banks that would include payment of up to $25 billion in penalties and commitments to follow new rules. In exchange, the banks would get immunity from civil lawsuits by the states, as well as similar guarantees by the Justice Department and Department of Housing and Urban Development, which have participated in the talks.

State and federal officials declined to say if any form of immunity from criminal prosecution also is under discussion. The banks involved in the talks are Bank of America, Wells Fargo, CitiGroup, JPMorgan Chase and Ally Financial.

This Reuters piece, courtesy of reader 'Ramon', is worth skimming...and the link is here.

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Europe steps up to the plate

Europe's leaders have grasped the nettle. Faced with a spiralling bond crisis in Italy and Spain and the greatest threat to the EU project for 50 years, they have ripped up their bail-out strategy and taken a large stride towards a "liability union".

France and its allies abandoned their long struggle to prevent a Greek default, opening the way for the first sovereign insolvency in Western Europe since the Second World War. Objections from the European Central Bank were swept aside. Germany has obtained its fig leaf concession: burden-sharing for bankers.

As a quid pro quo, Germany has dropped its vehement opposition to debt sharing and crossed the line in the sand towards fiscal federalism. It has agreed to turn the eurozone's €440bn bail-out fund (EFSF) into what amounts to a European Monetary Fund, and arguably into an EU Treasury in embryo.

Ambrose Evans-Pritchard, one of the fair-haired boys of the New World Order crowd, is jubilant in this longish column filed over at The Telegraph late last night...and I thank reader Roy Stephens for sending it along. It's well worth the read...and the link is here.

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Guest Post: If You Haven’t Bought Any Gold Yet…

Here's another view of the antics of the E.U. over the last couple of days. This is Simon Black of sovereignman.com fame....and he paints an entirely different picture than Ambrose does...one which I feel is much closer to the truth.

Print. Lie. Borrow. Deceive. Deny. These are a the principal tenets of the Greek restructuring plan that were released today from Brussels… it’s as if EU policymakers put it together after shaking a Magic 8-ball.

The whole world knows that Greece is bankrupt and has been living bailout to bailout for over a year. Deep in debt and devoid of cash, the country has completely forsaken its sovereignty in exchange for becoming a ward of the European Union; Prime Minister George Papandreou is now a hapless stooge awaiting instructions from Germany.

As I said in this column yesterday..."Here's a chart of Greek 2-year Bond Yields. At 39%...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.

This is a must read...and I thank reader U.D. for sending it along. The link is here.

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Gold is better than money, Rick Santelli tells King World News

Responding to the exchange the other day between U.S. Rep. Ron Paul and Federal Reserve Chairman Ben Bernanke as to whether gold is money, CNBC editor Rick Santelli told King World news yesterday that gold is better than money because it is less susceptible to what central banks are doing to their currencies.

I thank Chris Powell for providing the introduction...and the link to the KWN blog is here.

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Peru Mining Tax Increase Ahead?

In yesterday's edition of Casey's Daily Dispatch, there was an interesting commentary by Andrey Dashkov that I thought was worth your while.

Ollanta Humala, the newly elected president of Peru, will take office on July 28th. Having focused on improving macroeconomic stability and reducing poverty and inequality during his campaign, he made a number of claims that didn’t sound quite promising to the local mining industry. His proposals included extended control of mining or oil and gas concessions by the local communities and mining royalty increases.

Both would impact one of Peru’s top business sectors. Peru, one of the world’s leading copper and silver producers, is responsible for over 60 percent of exports and to a large extent, also for much of Peru’s overall economic growth, including increased employment and reduced poverty.

Yet the Financial Times released an article this Wednesday stating that Humala may not be as harsh on mining as he appears. The current head of the country’s central bank remains in power; his continued tenure in the Humala administration should serve as a signal of Humala’s good economic intentions.

In my opinion, this is worth the read...and you have to scroll down a bit to find Andrey's essay...and the link is here.

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Juniors to Rocket Because of Discovery & Consolidation - Rick Rule

Here's a short blog that was posted over at King World News yesterday, which I consider to of interest to all precious metal investors...and the link is here.

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Selling gold: How much that old ring is worth now

Here's a money.cnn.com story from Wednesday that reader Scott Pluschau sent me in the wee hours of yesterday morning...but I just didn't have the room for in Thursday's column, so here it is now.

For many cash-strapped Americans, old gold jewelry has become a valuable resource. The price of gold -- considered a safe haven investment in tough economic times -- hit a record high this week as concerns grew over whether U.S. lawmakers could reach a deal over the U.S. debt ceiling by August 2nd.

"With each new market high, we see a fresh new group of consumers," noted Steven Hansen, president of scrap gold dealer Goldfellow.com. Traffic to his web site doubled in the last week, while foot traffic at the company's 45 locations is also up substantially, he said.

This is well worth the read...and the link is here.

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Asian investors catch gold fever amid record price

Here's a Reuters story filed from Singapore yesterday. I 'borrowed' the headline...and the story...from a GATA release.

Gold fever is gripping Asian investors and could spread to central banks as global growth uncertainties tarnish the appeal of other assets, putting bullion on course for more gains but also provoking fears about supply.

"Record high prices won't scare away investors," said Shi Heqing, an analyst at Antaike, a state-backed metals consultancy based in Beijing.

Shi expects China's gold demand to rise about 20 percent to near 700 tonnes this year from 570 tonnes in 2010 as Beijing struggles to tame annual inflation that hit a three-year high of 6.4 percent in June.

This story is an absolute must read from start to finish...and the link is here.

View full GSD edition

(Click on image to enlarge)

The idea that an increase in the debt ceiling is a solution to anything is nonsense. Calling an increase in the debt ceiling a solution to a debt problem, is too stupid to be stupid. - Jim Sinclair

Gold volume yesterday was a pretty healthy 135,000 contracts net of all roll-overs out of the August contract...and the preliminary open interest number showed an insignificant increase of 408 contracts. This indicates that gold's open interest for the Thursday trading day will be down a fair chunk when the final number is posted on the CME's website later this a.m...but I suppose this should be no surprise considering the price action.

Wednesday's final open interest number in gold was only 4,289 contracts, which is pretty low considering the rally that we had during the Comex trading session that day.

Silver's net volume yesterday was a very chunky 69,000 contracts...and the preliminary open interest number showed an increase of 2,842 contracts. Considering the price action, open interest should have been down a fair chunk...unless there were new short positions being placed, or the true o.i. number was hidden by spread trades. No matter what the final open interest number is this morning, there's no way of telling what went on until the Commitment of Traders report comes out a week from today.

Wednesday's final open interest number in silver showed a very tiny increase of only 337 contracts. That's barely a rounding error...and is a big surprise considering the fact that silver rose two bucks from its low to its high during the New York trading session. I would say that a lot of what happened on Wednesday involved a decent amount of short covering...but this won't be known for sure until next Friday's COT report.

I must agree with Ted Butler that, considering the open interest changes in silver lately, something appears to be going on that JPMorgan is trying to hide from prying eyes. I doubt that today's COT report will reveal much, as the cut-off was at the close of Comex trading at 1:30 p.m. on Tuesday afternoon in New York...which was immediately followed by the bear raid by the bullion banks in the New York Access Market.

With five business days left to go before August's first notice day, there are still 312 silver contracts left open in the July delivery month...and, as I mentioned above, only one contract was posted for delivery yesterday.

Well, despite all the smoke and mirrors surrounding the E.U. bailout of some of the PIIGS yesterday, it certainly had no effect on the precious metal prices. One would have thought that if the European Union...and it's "who-owes-you-nothing" currency...had been saved, the gold price would have fallen sharply. Well, it obviously didn't happen.

Nothing much happened price-wise during the Far East trading session during their Friday...and the subsequent London open has been uneventful as well. Volume in both metals, especially gold, is very light...and the U.S. dollar is unchanged from Thursday afternoon's New York close.

The slightly overbought condition that existed in both silver and gold a couple of days ago, has eased a bit. But Ted says that bullion banks could still hammer the gold price pretty good, as last week's COT report was less than impressive. But he also pointed out that we could still go higher from here...perhaps sharply higher. We'll have to wait and see how this plays itself out in the days and weeks ahead.

As I put this column to bed, I note that crude oil is knocking on the $100 price door again...and I'd like to take a moment to remind you of the US$39 'blue-plate special' that the good folks over at Casey Research announced earlier this week...

"In a shocking admission, the well-respected International Energy Agency (IEA) projected that conventional crude oil production will “never regain its all-time peak of 70 million barrels per day (mb/d) reached in 2006.”

"In other words, according to the IEA, the world actually crossed over the point of "peak oil production" five years ago!"

"So the world's supply of conventional oil was on a downward slope – even before the ground-shaking events in the Middle East and Japan."

I find nothing shocking about what's in these three paragraphs, dear reader...or the entire report in general...as I already know that 'Peak Oil' is something that is already visible in my rear-view mirror, as I'm very plugged into the oil patch here in Canada. It's only a matter of how steep the downward slope is going to be. What I can guarantee you is that life on this planet will be thrown into violent upheaval the further down this 'peak oil' road we get.

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The report also talks about a new "Energy Dividend"...and I urge you to read all about it by clicking here.

That's enough for today...and as I hit the 'send' button, I note that gold is down about $3...and silver's down a bit over 30 cents, as of 5:10 a.m. Eastern time. As always, I await the New York open with great interest.

I hope you have a good weekend...and I'll see you here sometime on Saturday.