The gold price didn't do a whole heck of a lot in either Far East or early London trading yesterday...and was down a couple of bucks by the Comex open in New York.

A rally began right out of the gate...and the high of the day [$1,535.10 spot] was in at precisely 11:30 a.m. Eastern time. From there the price sold back down to the $1,530 mark...and then traded sideways for the rest of the Comex and electronic trading session. Volume was pretty decent.

The silver price hit an interim low shortly before 11:00 a.m. Hong Kong time. From that low, the silver price worked its way slowly higher. That rally ran out of steam at 11:00 a.m. in London...and then the silver price fell to its low of the day around 7:00 a.m. in New York...12:00 noon in London.

The subsequent rally lasted until a few minutes after 11:30 a.m. in New York...and then gently sold off a bit during the rest of the trading day. Volume was more than decent.

The world's reserve currency shed about 20 basis points during the first five hours of Far East trading yesterday morning...and the dollar hit its low about 11:30 a.m. Hong Kong time.

From that low, the dollar began moving higher, hitting its zenith [just above the 75 cent mark] about 10:20 a.m. in New York. By the close of trading, the dollar had given back a bit of those gains...but, all in all, the dollar didn't do much...and managed to close a whisker above the 75 cent mark.

Once again, there was no co-relation whatsoever between what the dollar was doing and precious metals prices.

The gold stocks pretty much followed the gold price action, but gave up a small part of their gains as the afternoon wore on in New York. The HUI finished up a respectable 1.21%.

A lot of the silver stocks did much better than this, and most of the stocks that make up Nick Laird's Silver Sentiment Index outperformed their golden cousins as well...and that index was up 2.47%.

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The CME's Daily Delivery Report showed that no gold contracts were posted for delivery tomorrow, but 210 silver contracts were posted. Goldman Sachs issued all 210 of them. The two biggest stoppers/receivers were the Bank of Nova Scotia with 113 contracts...and JPMorgan with 46 contracts in their client account...and 9 contracts in its proprietary [house] account.

There was no report from either GLD or SLV yesterday.

But over at Switzerland's Zürcher Kantonalbank for the week that was, they reported adding 24,073 ounces of gold to their stockpiles...along with another 384,844 ounces of silver. I thank Carl Loeb for these numbers.

The U.S. Mint had a smallish sales report again yesterday as they reported selling another 32,000 silver eagles.

The Comex-approved depositories reported a withdrawal of 302,892 ounces of silver on Tuesday...and did not receive a single ounce.

Here's a chart that I ran about ten days ago...or less. It's courtesy of Nick Laird over at sharelynx.com...and it's entitled Gold Price Oscillator. The last time I ran it, Nick commented that it was still in negative territory and he wasn't sure how long it was going to take before it broke out.

Well, it appears the time has come, as he had this to say about it in the covering e-mail..."The Gold & Silver Oscillators have just broken out so we have our new rally. Seems like the metals are bullish & keen to get going."

We can only hope...but if we can use this chart as a guide, it certainly would indicate that a break-out has occurred.

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Here's a new chart titled Gold/Silver Ratio - Future Potential Ratios that Nick sent my way yesterday evening. He first sent it to me on Tuesday...asking for any suggestions that I might have. I suggested that the Gold/Silver ratios from 50:1 all the way up to 100:1 be removed, as I doubted very much that we would see the sorts of gold/silver ratios again. He thought otherwise...and the result is below. Please use the "Click on image to enlarge" feature to bring it up to full-screen size so you can study it.

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¤ Critical Reads

Goldman Took Biggest Loan in Fed Program

Goldman Sachs & Co., a unit of the most profitable bank in Wall Street history, took $15 billion from the U.S. Federal Reserve on Dec. 9, 2008...the biggest single loan from a lending program whose details have been secret until today.

The program, which peaked at $80 billion in loans outstanding, was known as the Fed’s single-tranche open-market operations...or ST OMO.

ST OMO is the last known Fed crisis lending program to have its details made public. The central bank resisted previous FOIA requests on emergency lending for more than two years, disclosing details in March of its oldest loan facility, the discount window, only after the U.S. Supreme Court ruled it had to.

This was part of the Fed's 'cash for trash' program that kept the markets liquid...or there would have been a deflationary melt-down of biblical proportions. I thank West Virginia reader Elliot Simon for this Bloomberg story...and the link is here.

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Moody's lowers Portugal's credit rating to junk

Moody's became the first ratings agency to cut Portugal's credit standing to junk, warning the country may need a second round of rescue funds before it can return to capital markets.

The downgrade on Tuesday was not entirely unexpected and served as a reminder that Europe's debt troubles extend beyond Greece, which has dominated news headlines over its second financial bailout.

Some economists think Ireland may also need additional support, and investors worry Spain and Italy could be next in line for aid.

I thank Roy Stephens for this story that was posted over at france24.com yesterday...and the link is here.

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Greek Aid Challenged: German Court Likely to Rule 'Yes, But' On Euro Bailout

Did the German government act lawfully by committing billions of euros to the bailout of Greece? The answer of the Federal Constitutional Court, which began hearing the case on Tuesday, will probably be 'Yes, but.' The judges are likely to grant parliament greater power in decision-making and perhaps even set an upper ceiling on any future rescue package.

This short read, posted over at the German website spiegel.de, is also courtesy or Roy Stephens...and the link is here.

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The Saboteurs Among Us: Danish Border Controls Shake EU Foundations

With the reintroduction of border controls, the Danes are calling into question one of the EU's greatest achievements. Unfortunately, there has been little protest in Brussels and other European capitals. There is growing fatigue regarding European integration -- and that is a bitterly disappointing trend. [That depends on who you ask - Ed]

This short story, also posted at spiegel.de, is well worth your time. Once again I thank reader Roy Stephens...and the link is here.

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ETFs face review by U.K. Serious Fraud Office

Here's a Bloomberg story that ended up as a GATA release yesterday...and it's courtesy of reader 'David in California'.

U.K. fraud prosecutors are reviewing how exchange-traded funds are marketed and whether they have the proper tools to prosecute any wrongdoing in the industry, a person directly involved with the probe said.

Terry Smith, chief executive officer at London-based inter-dealer broker Tullett Prebon Plc, has said the products often fail to track the underlying asset whose behavior they're designed follow, are exposed to a provider going bankrupt, and vulnerable to short-selling.

Short selling you say??? I guess SLV, with 37.4 million ounces of silver sold short, would be an ETF that Mr. Smith might be talking about. It's well worth the read...and the link is here.

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More property floods Dubai, Abu Dhabi rents drop 9%

Some 2,000 homes were completed in Dubai in the second quarter and another 18,000 will be ready for occupancy by the fourth quarter, a report from property consultancy Jones Lang LaSalle said, adding that total current residential stock will rise to around 322,000 homes.

Office supply in Dubai is expected to grow by more than 30 percent over the next three years, it said.

Dubai house prices, already nearly 60 percent off their peak, are set to drop another 10 percent before stabilizing, Reuters poll showed.

I thank reader U.D. for this story posted over at the arabnews.com website...and the link is here.

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Iranians go for gold amid inflation and currency fears

Amid global economic uncertainty, the price of gold on world markets rose steadily in the first half of 2011 and Iranian coins appreciated in line with that. Rather than cashing in their coins for a profit, Iranians continued to buy them in ever larger numbers.

Whether for wedding gifts or as a way to squirrel away savings, Iranians have a long history of buying gold coins, widely available from dealers in high street shops and bazaars. But recently, what was a steady demand has become a gold rush.

The Iranian gold rush was mainly driven by fears about the domestic economy, particularly the risk of soaring inflation and a wobbly currency, he said.

This Reuters story, filed from Tehran, is one I ripped out of a GATA release yesterday. It's well worth your time...and the link is here.

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New Chinese exchange will destroy gold and silver shorts, whistleblower Maguire predicts

Here's a GATA release of a King World News blog with Andrew Macquire. Chris Powell has already wordsmithed the preamble, so I won't bother.

This is an absolute must read...and the link is here.

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Gold is already the true reserve currency and silver will join it, Sprott tells BNN

Interviewed yesterday on Business News Network in Canada, Sprott Asset Management CEO Eric Sprott said the markets already are recognizing gold as the true world reserve currency and that silver likely will join gold in that respect. He also reviewed the world economic situation generally. The interview is 16 minutes long...in two parts...and you can watch it at the BNN Internet site linked here. The two clips run sequentially...and both are must views.

Eric Sprott will speak at GATA's Gold Rush 2011 conference in London in early August.

I thank reader Brad Robertson for sending me this interview which ended up as a GATA release shortly thereafter.

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Gold volume was pretty heavy yesterday, at least for a summer trading day. Volume was around 125,000 contracts net of all roll-overs...and the preliminary open interest number showed an eye-watering increase of 12,112 contracts. Based on this number, I would guess that yesterday's rally in gold ran into massive bullion bank selling...as it appears they were the short sellers of last resort against all the new longs that showed up in the market. Although the final o.i. number will be smaller than this, it will still show a chunky increase, which is not what I wanted to see.

Silver's net volume yesterday was a pretty healthy 58,000 contracts, but the preliminary open interest number showed an increase of only 2,521 contracts. I'm inferring from that, the yesterday's rally involved some short covering. Hopefully the final o.i. number later this morning will confirm that.

Tuesday's final open interest number in gold was what I was hoping for, as it showed a decrease of 4,387 contracts. So Tuesday's rally involved a great deal of short covering by the bullion banks, which they probably put back on [plus more] in Wednesday's rally.

Silver's final open interest number for Tuesday also showed a decline, but it was a smallish 355 contracts. Better that, than the alternative, I suppose. These final o.i. numbers for the Tuesday trading day will show up in tomorrow's Commitment of Traders Report.

Silver's open interest for July has declined all the way down to 965 contracts still open...and it has been falling in big chunks every business day this month...all three of them! It appears from this data that there won't be any Comex delivery problems in the July delivery month.

The gold price has now broken through its 50-day moving average to the upside...and has already run into huge resistance from the bullion banks who appeared to be going short all comers in the Comex futures market yesterday.

How far and how high this gold rally goes is 100% dependent on what the bullion banks do now that the technical funds are coming back into the market on the long side...and we've already seen what they did yesterday in the face of that development.

This is what silver analyst Ted Butler had to say about it in his mid-week note to clients yesterday: "...the next logical step is to handicap the extent and duration of the rally. This analysis is based upon how quickly the COTs now deteriorate, namely, how aggressive is speculative buying and commercial selling [read bullion banks - Ed] on the rally. Once the speculative buying and commercial selling is advanced, then concern must be given to the inevitable sell-off. Only future COT reports can offer guidance as to when a sell-off becomes likely. This week’s COT, to be released Friday, won’t be much help in measuring the deterioration because it will only cover the first day of the rally which was yesterday, the cut-off day. We’ll need to review the yet to be published future COTs to learn of any warnings of a sell-off. For the time being, this rally should be treated as likely to continue until strong statistical data is given to the contrary."

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Here's the 1-year silver chart. We have yet to penetrate the 50-day moving average to the upside...and it's my humble opinion [based on what Ted has told me in the past] that the trading action in silver on both Tuesday and Wednesday involved a lot of short covering by the bullion banks...plus they may have gone long themselves.

They did this under these circumstances because the technical funds won't come back into this market until silver's 50-day moving average has been penetrated to the upside, so JPMorgan et al are making the most of this opportunity...which they've done in the past as well. I'm hoping that tomorrow's COT in silver will tell us a lot.

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One other thing of note from this silver chart. If you check the 2010 July month, you will see that silver's low for the summer was set towards the end of the month...and JPMorgan et al began to cover their short positions in earnest soon after. With the extreme sell-off in silver that we've had since the May 1st 'drive by shooting'...we are at the very bottom of the silver barrel from a price point of view...and I find it extremely unlikely that last Friday's low price in silver will be revisited.

Silver and gold prices didn't do much of anything during the lightly-traded Far East market yesterday...and both are back to unchanged from yesterday's New York close, now that London has begun to trade this morning. The dollar is comatose...and the volumes are very light in both metals.

All eyes should be on the Comex open, as that is where all the price action [and volume] will occur.

I hope your Thursday goes well...and I'll see you here on Friday.