What Was That? Short Covering?

All was quiet through Far East and London trading on Thursday... but at 9:30 a.m. in New York, gold took off... and, in 30 minutes, was up to its high of the day of $1,202.20 spot. Then, the buyer either disappeared, or massive selling took place that stopped the rally in its tracks at the London p.m. gold fix. Gold certainly wasn't allowed to close over $1,200... and sank back to just below $1,195 spot at the close of electronic trading in New York.

Silver's low of the day [around $17.60 spot] was in afternoon Hong Kong trading yesterday... shortly before London opened. From there, the price trended generally higher before going ballistic at precisely 9:30 a.m... right along with gold. Silver's rally ended precisely 30 minutes later at 10:00 a.m. Eastern... which, as I pointed out above, just happens to be the London p.m. gold fix. Silver hit a high of $18.22 before trading sideways for the rest of the day.

Ted Butler felt that yesterday's action was short covering by JPMorgan... and certainly had the look of short covering rallies to me as well. I'm hoping that this mornings final open interest numbers posted at the CME's website will shed a little light on this... but, as you already know, the bullion banks are masters at hiding their tracks. Trading volume in both metals on Thursday was average... and I highly doubt that the big price spikes involved much volume at all.

From the start of trading early on Thursday morning in the Far East... right up until 11:30 a.m. in New York... the world's reserve currency fell about 80 basis points. One would need a very special set of reading glasses to find any co-relation between the U.S. dollar and the gold price yesterday.

Naturally, the precious metals stocks peaked at precisely 10:00 a.m. along with the metals themselves. Then they spent the rest of the day losing about a percent of their Thursday's advance... but the HUI managed to hold onto a 2.08% gain.

The CME Delivery Report for Thursday showed that 60 gold and 6 silver contracts were posted for delivery on Monday. Here's the link to the action. The GLD ETF reported another withdrawal yesterday. This time it was 195,559 troy ounces... and, once again, there were no changes reported in the SLV. The U.S. Mint had a report yesterday as well. It showed that another 9,000 ounces of gold disappeared into the gold eagle program... along with another 1,000 24-K gold buffaloes. There were no silver eagles reported sold. Over at the Comex-approved depositories on Wednesday, another 193,009 ounces of silver were taken into inventory... all of it into the Delaware depository... and the link to that action is here.

Today is the day for this week's Commitment of Traders report... which will be issued at 3:30 p.m. Eastern time sharp. Both Ted and I are expecting a good report... and both of us will have our comments on it in Saturday's column. Here's the link to the COT report when it's posted.

I've only got five stories today... which suits me fine... and probably you as well, dear reader. The first one is gold-related and was sent to me by Scott Pluschau. It's posted over at the investmentexecutive.com website and bears the headline "Gold to climb above US$1,500 an ounce". That's a pretty conservative estimate these day, and Nick Barisheff, president and CEO of Bullion Management Group Inc. feels we'll be there before the end of the year. I'd say that he's probably on pretty safe ground with that prediction... and the link to this rather short article is here.

Yesterday I ran an article about the $600 reporting requirement to the IRS that kicks in on January 1, 2012 for all Americans Well, here's another story about what the U.S. Government has been up to regarding taxation. The story is another offering from reader Scott Pluschau. It's posted over at investors.com... and the headline reads "The Tax Tsunami On The Horizon". I urge all my American readers to run through this is, as it ain't pretty. It's about three pages long... and the link is here.

Reader Roy Stephens was kind enough to provide the following story that was posted yesterday at the German website spiegel.de. The headline reads "Running for the Door: German Giants Flee Wall Street"... With expensive accounting rules, an increased threat of litigation and hundreds of millions of dollars in fines for some firms, the once prestigious New York Stock Exchange and other American markets have become unattractive to Germany's biggest companies. Daimler and Deutsche Telekom have fled this year and the few remaining are likely to follow. It will take a bit over five minutes to read this... and I feel that it's worth it... and the link is here.

The next piece is a very interesting story that showed up posted at zerohedge.com yesterday. It was commentary on a story out of The Wall Street Journal on Wednesday that was headlined "Bond Sale? Don't Quote Us, Request Credit Firms". Apparently, the nation's three dominant credit-ratings providers have made an urgent new request of their clients: Please don't use our credit ratings. The odd plea is emerging as the first consequence of the financial overhaul that is to be signed into law by President Obama on Wednesday. And it already is creating havoc in the bond markets, parts of which are shutting down in response to the request.

Anyway, 'all of the above' was the introduction to The Wall Street Journal story... and the rest is subscription protected. But the commentary over at zerohedge.com that comments on the WSJ article, bears the headline "U.S. Credit Firms Tell Clients Not To Use Their Ratings?". It now appears that the new Frank-Dodd financial reform law makes the agencies liable for their ratings effective immediately. It's a short piece... and I thank reader U.D. for sending it along. It's also a must read... and the link is here.

The aureport.com website is the source of my last story [and big read] for today. It's written by my good friend Ian Gordon of Longwave Group out of Vancouver, B.C. The essay is entitled "The Perpetual War: Gold vs. Paper"... and in the opening paragraph Ian states that "Gold and paper are forever at war with each other. Throughout the centuries, they have waged many battles. Each of these battles has produced an outright winner and a decimated loser." If you have the time to read it, it's certainly worth your while... and I once again thank reader U.D. for sharing it with us... and the link is here.

I must admit that yesterday's action in gold and silver was a big surprise. Is it a portend of things to come? I don't know... but it sure got my attention! It will be interesting to see if this sort of trend continues.

There are some definite signs of life in both gold and silver that started at 2:00 a.m. Eastern time this morning... but it's too soon to tell whether it's going to develop into anything bigger. Volume in both metals is microscopic. It's been many years since I've seen numbers this small at this time of day [4:31 a.m. Eastern]... so I wouldn't read too much into the price action until the bullion banks show up.

Well, my stocks have been doing pretty well this week. There's still time to get on board this train before it leaves the station. If you still haven't taken the plunge and purchased your fill of precious metals stocks, a good place to start would be either Casey's Gold and Resource Report... or Casey Research's flagship publication... the International Speculator. It costs nothing to check them out... and CR's money-back guarantee is always in place. Resident geologist, Louis James has a new article posted at the above I.S. link, and you should check it out, as it's free.

After yesterday's performances, I'll be watching what JPMorgan et al are up to with great interest when New York opens in a little while. Since it's Friday, literally anything could happen.

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