After briefly flirting with the prospect of breaking through $1,555 spot in early Far East trading on Tuesday morning, gold got sold off about fifteen bucks...hitting its low of the day shortly after high noon in London.

From that low, the gold price spent the New York Comex session grinding its was back to Tuesday's closing price. Shortly after it got there, a serious buyer showed up about fifteen minutes before the Comex close, and bid the price up twenty bucks in just over an hour.

After the buyer vanished, the gold price sold off a few dollars into the close of electronic trading at 5:15 p.m. Eastern time...but still managed to close the day at a new record high price. For a summer trading day, volume was pretty heavy.

Silver pretty much traded sideways up until about a half hour before London opened...and then got sold off to its low of the day at the exact same moment that gold hit its low, which was shortly after twelve noon in London. This looked like a slightly late silver fix to me.

From that point, the silver price then pretty much duplicated the run-up in price that the gold had...but a willing seller showed up shortly after the price broke through its 50-day moving average...and that was that for the rest of the trading session in the New York Access Market. Volume was pretty heavy.

The dollar opened around the 76.00 cent mark...and then proceeded to rally a hair over 70 basis points, hitting it's zenith a few moments before 4:00 a.m. Eastern, which was shortly before 9:00 a.m. London time.

From that high, which was more than three hours before gold and silver hit their lows, the dollar headed south with a vengeance...losing about 90 basis points...and hitting its low of the day shortly after 2:00 p.m. in New York. The dollar gained back about 20 basis points before the end of the New York trading day...and the buck closed within an eyelash of unchanged.

Once again the two precious metals traded with a mind of their own relative to the dollar.

While we're on the subject of the almighty dollar...although this applies to all fiat currencies...here's a chart that Nick Laird sent me in the wee hours of this morning. Since the bottom in gold in the first quarter of 2001...the U.S. dollar has lost almost 85% of its purchasing power vs. the yellow metal since then. I would think that the chart for every other currency on Planet Earth would bear a striking resemblance to this chart before you.

(Click on image to enlarge)

Even though the gold price was not back above its Monday opening price, the gold stocks were in the black almost from the moment that the equity markets began trading in New York at 9:30 a.m. Eastern time.

Once the HUI was up about a percent, it traded sideways until the big breakout at 1:15 p.m. Eastern..and that point is not hard to pick out on the chart below. The HUI closed just off it's high of the day... up 3.09%.

For obvious reasons, the silver stocks didn't do quite as well as their golden brethren, but they turned in a very respectable performance nonetheless...with Nick Laird's Silver Sentiment Index up 2.31% when all was said and done.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that one gold, along with 201 silver contracts, were posted for delivery on Thursday. In silver, the big issuer was Merrill with 191 contracts...and the biggest stopper/receiver was the Bank of Nova Scotia [108 contracts] and JPMorgan [45 contracts] in their client account. The link to the action is here.

The GLD ETF received a very chunky 357,113 ounces of gold yesterday...and there were no reported changes in SLV.

The U.S. Mint had a smallish sales report yesterday, as they reported selling 1,000 ounces of gold eagles.

The Comex-approved depositories reported receiving 613,435 ounces of silver on Monday...and shipped 17,788 ounces out the door. The link to that action is here.

Here's an interesting chart...and for the life of me, I can't remember where I stole it from...but it is interesting. It shows the percentage of different countries GDPs that disappear into public spending for a variety of different countries.

I'm delighted [almost ecstatic, actually] to report that I only have a small handful of stories for your reading 'pleasure' today!

¤ Critical Reads

French Inflation Quickens to Fastest Since 2008

Here's a Bloomberg story from yesterday that was sent to me by reader Scott Pluschau.

France's inflation rate unexpectedly climbed to the highest in more than 2 1/2 years in June as costs for food, energy and services rose.

Consumer prices jumped 2.3 percent from a year earlier, based on European Union methodology.

Every story on inflation these days is now prefaced by the word 'unexpected'...and it should be no surprise why inflation is rampant, as it is strictly a monetary phenomena. Needless to say, these inflation numbers are probably understated by a few orders of magnitude...just like they are by the BLS in the U.S.A.

The link to the Bloomberg story is here.

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Debt Contagion Threatens Italy

Here's a story about the rapidly deteriorating situation in Italy that was posted over at The New York Times on Monday.

“Italy is too big to fail,” said Moisés Naím, a senior associate in the international economics program at the Carnegie Endowment in Washington. “If Italy really gets hit by contagion because of political mismanagement, it would be a threat not only to the euro zone, but to the global economy.”

In a sign of how quickly things have turned against the country, the stock market regulator imposed emergency rules on Monday against speculation after shares in Italian banks slumped for a fifth consecutive session. The cost of insuring Italy’s sovereign debt against default surged to a record high, and the interest on its 10-year bond leaped to a record 5.67 percent.

Spain is also in big trouble as well...and although not to big to fail, both countries are way to big to bail out.

I thank reader Roy Stephens for this story...and the link is here.

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The World from Berlin: For Euro Zone, It's Euro Bonds or Else

Markets in Europe are being hit hard by fears that the debt crisis will spread to Italy, which is regarded as too big to rescue. German media commentators say the time has come to stop the piecemeal bailout efforts and to make the member states share liability for their debt -- via euro bonds.

The bailout efforts taken over the past 18 months have been piecemeal and achieved little more than buy time, they argue, adding that a fundamental reform of the euro zone's financial architecture is required: Member states may have to assume common liability for public debt in the 17-nation euro area via the introduction of so-called euro bonds -- a taboo until now because it enshrines the principle that strong euro-zone economies assume liability for the debts of the weaker ones.

Great, just what the world needs is more paper that will most surely be defaulted on sooner or later.

This article, which is also courtesy of reader Roy Stephens, was posted at the German website spiegel.de yesterday. It's certainly worth the read...and the link is here.

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Property developers in China move into mining

China appears to be facing a real estate slump. As home sales fall, property developers are getting into mining in a big way, producing gold, lead, zinc and molybdenum. According to the China Mining Association, at least 15 property developers have tapped the mining industry recently with a total investment of about $3 billion by the end of June.

This is a very interesting story...but if you don't want to read the whole thing, scroll down to the sub-heading that reads "Seeking Gold"...as that part is a must read.

This is a mineweb.com story that was sent to me by reader Gerold Becker...and the link is here.

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James Dines audio interview at King World News

In my Saturday column I posted the James Dines blog, as that was all the Eric King had at the time. Now the entire interview is posted...and Mr. Dines is calling for $300 to $500 silver.

The interview is most likely worth your time, but I can't comment on it, as I haven't had the time to listen to it...and the link is here.

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Huge base will propel silver to record highs with gold: James Turk

Here's another King World News blog that Eric sent me. It's not a big read...but it's a must read...and the link is here.

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Here we come to the crux of the matter. The financial system is underpinned by sovereign debt paper and nothing but sovereign debt paper. To endanger the perceived “risk free status” of this paper is to threaten the underpinnings of the whole structure. That is what the US and its “ratings agencies” see Europe as doing. This is why the risks of these downgrades have been taken - they are now willing to sacrifice the periphery to save the centre - US Treasury debt and the US Dollar. They are buying very expensive time. - Bill Buckler, The Privateer...July 10, 2011

Gold volume was around 157,000 contracts net of all roll-overs yesterday...and the preliminary open interest was up another huge amount at 15,796 contracts, so yesterday's big late-day rally did not go unopposed. It's also a pretty good bet that not all of yesterday's trading volume was reported in a timely manner by JPMorgan et al...and there will be some spill-over into Wednesday. Whatever the final o.i. number is that the CME reports later this morning, will be in Friday's Commitment of Traders Report, as yesterday was the cut-off for it. Ted figures that the U.S. bullion banks have been going massively short against this rally in gold...and there will be huge deterioration in Friday's report. I agree with that assessment.

The final gold open interest number for Monday was reduced down to a 5,743 contract increase...down about 50% from the preliminary number. I'm hoping/praying for at least as good as that for Tuesday's number.

Silver's net volume yesterday was a reasonably robust 56,000 contracts...but considering the size of the rally, the preliminary open interest number is only up 2,702 contracts, so I'm cautiously optimistic that the final number will be much reduced...hopefully to zero...but that would be expecting too much.

The final open interest number in silver for Monday's big down day showed an increase of 1,548 contracts. That was probably the small commercial traders putting long positions back on that they sold in the previous week. We won't know for sure until Friday's COT report.

There are still 712 silver contracts open in the July delivery month...but the 201 contracts that were posted for delivery on Thursday that I mentioned further up in this column, have yet to be subtracted from that total, so we're down to about 500 contracts left open. That should show up in tomorrow's report.

Here's the 1-year gold chart. Since the July 1st low, the gold price is up about around $85...and the RSI is heading back into overbought territory. We aren't there yet, but it's only a matter of time the way things are unfolding. How long the JPMorgan will allow this rally to continue remains to be seen. We could certainly run for a quite a while longer...or they could pull the pin tomorrow. We'll just have to wait it out.

(Click on image to enlarge)

For the second time this week, the rally in silver got stopped in its tracks shortly after it crossed over its 50-day moving average...and the price ended the day below that moving average. It's obvious that someone is riding shotgun over the silver price...making sure that it doesn't break substantially through that price level for the moment. When it does break through...and the technical funds start pouring back into this market...how high the price goes depends on whether or not the bullion banks are going to be there to take the short side of the trade...like they're doing in gold now that the price is above its respective 50-day moving average. We'll have to wait and see on this, as well.

Here's the 1-year silver chart.

(Click on image to enlarge)

Gold got sold off a few bucks for most of the Wednesday trading session in the Far East...but began to rally later in the Hong Kong afternoon as the time for the London open approached. Gold spike briefly above $1,575...a new record high.

Silver has been following the same price path as gold...and is now above its 50-day moving average...and running into some price resistance. It will be very interesting to see how silver trades today.

Volume in both metals is already pretty substantial...virtually the same as this time yesterday...and the dollar is down about 19 basis points as of 5:31 a.m. Eastern

I'm only guessing here, but it could be a really interesting trading day in New York.

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That's enough for today. I'm off to bed. See you tomorrow.