JPMorgan et al Keep Pounding Away

Gold's high of the day came shortly after 11:15 a.m. Hong Kong time in Far East trading during their Thursday morning and, it was as they say, all downhill from there. Then, around 11:00 a.m. in New York...either the bullion banks pulled their bids, or someone shorted the gold market...and gold was down another $17 in very short order. The low of the day [$1,309.60 spot] came around 4:00 p.m. Eastern in electronic trading...and closed barely off that low.

Needless to say, the gold price on Thursday made a new low for this move down. The 200-day moving average, which seemed totally out of reach 24 hours ago, appears to be firmly in the bullion banks' crosshairs. Can they do it...and how long will it take them...is anybody's guess.

Silver hit its high of the day [around $27.85 spot] about fifteen minutes before gold did on Thursday morning in Hong Kong trading. But, from that point, silver's price action took a somewhat different path than gold's...as silver struggled mightily...and by the time that JPMorgan et al pulled the pin on gold in New York, silver was actually up over a dime on the day. Since the silver price didn't want to fall voluntarily along with the gold price, someone decided to give it a shove...and silver was down 80 cents in about an hour. Then it basically traded sideways for the rest of the New York session...and instead of closing in the plus column like it would have...silver finished down 69 cents on the day. It's low tick of the day was $26.78 spot in New York sometime.

Well, it should be obvious to all and sundry that there was nothing free-market about what happened during New York trading in the precious metals yesterday. This is a crime in progress...and the CFTC won't lifting a finger.

But, neither platinum and palladium were spared, either. Gold finished down 2.32%...silver was down 2.50%...platinum 1.38%...and palladium 1.11%.

The world's reserve currency was very volatile within a tight range yesterday...and its machinations were of no consequence in the gold market on Thursday. I note they changed the colours on the graph as I was writing this early yesterday evening...as the website was down briefly...and when it came back up, this was the result. It's kind of fetching, don't you think?

With the gold price already in negative price territory by 9:30 a.m. when the New York equity markets opened, it was no surprise that the gold stocks began trading in the red right out of the chute. The bottom came after the big morning sell-off in gold ended...which was 11:30 a.m. Eastern. From there, the gold stocks pretty much traded sideways for the rest of the New York session...and the HUI finished down 2.63%.

I note that even though gold and silver got smoked on Thursday...taking back all of Wednesday's gains and then some...the gold and silver stocks didn't give up all their considerable gains from Wednesday. That's a big positive in my books.

The CME's Daily Delivery report on Thursday showed that 2 gold and 2 silver contracts were posted for delivery on Monday. Today is last day for posting deliveries into the January contract for both gold and silver...and first day notice for delivery in the February contract is on Monday. It's a big delivery month for gold...but not for silver. It's next big delivery month is March.

The GLD ETF showed another decline yesterday. This time it was 97,580 troy ounces of the stuff. The SLV ETF parted with 683,752 ounces of silver.

And, for the fifth business day in a row, there was no sales report from the U.S. Mint

But it's almost always busy over at the Comex-approved depositories, as the frantic in/out movements continue almost without a break. By the time they headed home on Wednesday...another 156,749 ounces of silver had removed from their collective inventories. The link to that action is here.

¤ Critical Reads

Wall Street’s Collapse to Be Mystery Forever

I have an assortment of stories for you to pick through today. The first is an op-ed piece that was posted over at Bloomberg in the wee hours of this morning...and it's courtesy of Washington state reader S.A. Jonathan Weil is a Bloomberg News columnist..and the headline reads "Wall Street’s Collapse to Be Mystery Forever". Jonathan is less than impressed with what's to be found in the report by the Financial Crisis Inquiry Commission that was released yesterday...and doesn't hesitate to says so. The link is here.

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Japan’s Credit Rating Cut to AA- by S&P on Debt Load

My next offering is another Bloomberg piece...and this one's courtesy of reader Scott Pluschau. Japan’s credit rating was cut for the first time in nine years by Standard & Poor’s as persistent deflation and political gridlock undermine efforts to reduce a ¥943 trillion [US$11 trillion] debt burden. The headline reads "Japan’s Credit Rating Cut to AA- by S&P on Debt Load"...and the link is here.

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Italy confiscates €20 billion in fake US bonds

The next piece is an AP story sent to me by reader Doug Beiers that's posted over at finance.yahoo.com. For the second time in as many years, counterfeit U.S. bonds have been seized in Italy. It's a very short read that's headlined "Italy confiscates €20 billion in fake US bonds"...and the link is here.

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The World from Berlin: 'The Era of Paralysis in Egypt Has Ended'

As you are aware, the problems in Algeria and Tunisia have now spilled over into Egypt...and my next three offerings are all on this subject. The first is a piece from the German website spiegel.de that's courtesy of reader Roy Stephens. The headline reads "The World from Berlin: 'The Era of Paralysis in Egypt Has Ended'. It's not overly long...and I feel that it's worth your time. The link is here.

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Egyptian Stock Market Plunges Over 11% To Fresh Multi-Year Lows; Is A Suez Canal Transit Halt Imminent?

The second Egypt-related story is from Washington state reader S.A...and it's a posting over at zerohedge.com that's headlined "Egyptian Stock Market Plunges Over 11% To Fresh Multi-Year Lows; Is A Suez Canal Transit Halt Imminent?" It's a bit of a read, but well worth it in my humble opinion...and the link to the story is here.

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Cables Show Delicate U.S. Dealings With Egypt’s Leaders

The last story on this issue is another offering from Washington state reader S.A. This article is posted in yesterday's edition of The New York Times and bears the headline "Cables Show Delicate U.S. Dealings With Egypt’s Leaders". All the information in this piece comes from a treasure trove of dispatches made public by the anti-secrecy group WikiLeaks that paints a vivid picture of the delicate dealings between the United States and Egypt, its staunchest Arab ally. There are lots of juicy tidbits in this...and I suggest you run through it if you have the time. The link is here.

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Interview with Jim Rickards

Yesterday in this column I ran a King World News blog with Jim Rickards. Late last night Eric King sent me the link to the entire audio interview which runs about ten minutes. This "Interview with Jim Rickards" is an absolute must listen from beginning to end...and the link is here. Jim spends a lot of the interview talking about gold...plus the possibility that Ireland [and other countries in the E.U.] will default on their debts.

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Will the Gold Rush Continue?

I have three other precious metals-related stories for you today...and all of them quite different. The first is a CNBC interview with the CEO of Newmont Mining in Davos, Switzerland yesterday. He thinks that "we're maybe halfway though the gold cycle"...and he feels that we're going to see less supply and much more demand as time goes on. The interview runs 5:32...and is headlined "Will the Gold Rush Continue?". I thank Russian reader Alex Lvov for sharing it with us...and the link is here.

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The Red Dragon’s Golden Breath

Your next read of the day is a very short piece by Casey Research's own Jeff Clark...the editor of BIG GOLD. The headline reads "The Red Dragon’s Golden Breath". It's posted in the January 25th edition of Casey's Daily Dispatch...and you have to scroll down a handful of paragraphs to get to the article in question. The link is here...and it's worth the trip.

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Small Gold Trader Makes Big Splash

Just as I was about to hit the 'send' button...silver analyst Ted Butler sent me this must read story from this morning's edition of The Wall Street Journal. And, as he pointed out on Wednesday, this explains the huge drop in gold's open interest on Monday...as a small hedge fund got caught out. As gold prices started falling this year, a trade by SHK Asset Management, which was a combination of being long and short gold contracts—bets that prices will both rise and fall—started going bad. Monday, he liquidated his position, and is returning money to clients.

"Yeah, that was just me liquidating my spread position," Mr. Shak, 51 years old, said in an interview. "I had a significant, fully margined position. The dollar amount of the gold liquidation was very small, it was just a lot of contracts." Eighty-one thousand contracts to be precise. Ted Butler's explanation for what happened on Monday turned out to be 100% correct...it was all spread related. The headline reads "Small Gold Trader Makes Big Splash"...and the link to this absolutely must read story, is here.

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Gold is insurance against a financial Armageddon. Gold's over $1,400 an ounce as we speak. When it gets up to $5,000 people will say, "Oh my goodness. I bought it at $1,400. I can sell it at $5,000 and make a lot of money." That profit may be there, but the way to look at gold is that it anticipates the inflation ahead and preserves the purchasing power of your paper assets. Even if gold gets to $100,000, it's not that you've made $98,600 profit, it's just that you still have the purchasing power you did with your $1,400 gold.- John Williams, shadowstats.com

After a wonderful day on Wednesday, JPMorgan et al showed up again and hammered the snot out of the precious metals one more time. In the process, they painted a new low price for gold...and certainly caused more tech fund long liquidation. Silver did not hit a new low in New York trading yesterday...but 'da boyz' took care of that oversight in early Far East trading earlier this morning.

Gross volume traded in gold was 410,000+ contracts...but, once all the roll-overs and spread trades are removed, the net volume number dropped by about half. Judging by the preliminary open interest number, we'll see an increase in open interest when the final CME totals go up later this morning. That's not necessarily a bad thing, as the tech funds could have been piling onto the short side...a process which also increases open interest. Unfortunately, we're going to have to wait until next Friday's Commitment of Traders report to see what really took place.

Silver's volume [net of all roll-overs] was around 62,000 contracts, which is quite chunky. I'm guessing from the preliminary open interest number, that there won't be much change when the final number is posted later this a.m. in New York.

The final open interest changes for Wednesday's trading day showed that gold o.i. fell 14,825 contracts...which was a bit more than I was expecting. How much of that was actual short covering, or spreads being lifted, is hard to tell. As per usual, this data won't show up until next Friday's COT report.

Silver's open interest decline on Wednesday checked in at 1,008 contracts.

Today is the day when the Commitment of Traders report is issued at 3:30 p.m. Eastern time sharp. This report will be for positions held as of the end of trading on Tuesday, January 24th. When issued, the link to that report is here. With all the big changes in price...and spread trades in both silver [last Wednesday] and gold [this past Monday]...it should be a sight to behold.

Although it was another rough day, I get the distinct impression that the bullion banks [at the behest of the CFTC] are getting their gold and silver houses in order...and both Ted Butler and I feel quite strongly that when the next major rally begins in both metals, the bullion banks will be standing there with their hands in their pockets this time...and won't be back on the short side until precious metals prices are substantially higher than they are now...if they ever come back at all, that is.

I pay very close attention to what Jim Rickards and others are saying...not only directly, but between the lines as well...and after watching every twitch of the precious metals market for the last ten years or so, this appears to be the final [and very ugly] cleanout before the mania phase begins.

As Ted points out to his private clients [and myself] with almost every commentary he writes these days...as painful as all these price declines are, the internal structure of the market is the strongest its been in years...and if the bullion banks are nowhere to be found on the next rally, then you can pick a very large number for all the precious metal prices.

That's why I don't trade this market. I'm afraid of the day when the markets switch to 'no ask'...and then how is one ever going to get back in the this market unless they're prepared to pay through the nose for shares...or the metal, if there's any to be had, that is.

Gold got sold off about ten bucks shortly after markets opened in the Far East on Friday...and I would suspect that it was the bullion banks trading on the Globex that caused it. From the early morning low in Hong Kong trading, gold has worked its way back slowly...and is now in positive territory now that trading in London is underway. Volume, net of all roll-overs is average.

It was a crucifixion in silver...as the price came under pressure almost from the moment the Far East opened...and then cratered about 9:30 a.m. Hong Kong time. This was caused by a short sale...or the bullion banks pulling their bids in a thin-volume market. It's hard to tell which it was...but a new low price for silver was set for this move down. Silver has risen slowly back towards unchanged...but is still in the red as of 5:00 a.m. Eastern time. Silver's volume is high...and that seems to be the new norm for silver these days.

I must admit that [along with Mondays] Friday's are my least favourite days of the week. In the past, the bullion banks have saved their most vicious attacks on gold and silver for the last day of the week. Only the bullion banks know how the New York trading day is going to play out...and they're not talking.

Here's the 1-year gold chart to put yesterday's smack-down in some sort of perspective. You can see that the RSI hasn't been this low in over a year...and it will be interesting to see if the 200-day moving average is within the bullion banks' grasp. Right now, gold is about $36 spot away from that moving average...and it will be morbidly fascinating to watch if they can 'slice the salami' over the next few days and reach it.

Silver's 200-day moving average is many dollars away...and I just don't think that they can get enough tech fund selling to get the price down to that level. It remains to be seen if they can.

As I said in this column last Saturday, I know it's hard to think of precious metals investment opportunities at a time like this. But, as I've mentioned before, you can never catch the entire move...but if you catch a major portion of it, you're doing well. There's still time to either readjust your portfolio...or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and I respectfully suggest that you take a trial subscription to either Casey Research's International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers], with all our best [and current] recommendations...as well as the archives. A subscription to the International Speculator also includes a free subscription to BIG GOLD as well. And don't forget that our 90-day guarantee of satisfaction is in effect for both publications.

Have a good weekend...and I'll see you here tomorrow.