Like Thursday, gold was under quiet selling pressure all through Far East and London trading on Friday...with some of that being dollar index related.

The New York low [$1,604.90 spot] came just before 8:40 a.m. Eastern time...and then about ten minutes later a buyer of some significance showed up. About two hours...and a bit over twenty-three bucks later, gold reached its high tick of the day, which was $1,628.30 spot.

Then, either the buyer disappeared, or a not-for-profit seller showed up and, based on the volume and price action yesterday, I'd guess it was the latter scenario rather than the former.

From its high, gold got sold down eight bucks in very short order, before trading sideways into the 5:15 p.m. electronic close in New York.

But after all was said and done, gold only finished up $3.50 at $1,620.50 spot. But volume jumped up to around 120,000 contracts, so this rally did not go unopposed.

Silver's price path was the same...but different. It, too, was under light selling pressure during the same overseas time period...and by the time Comex trading began, the silver price was down about two bits from Thursday's close.

Then about 8:35 a.m. silver got smacked for thirty five cents in about ten minutes, with the low of the day [$27.51 spot] coming at 8:50 a.m. in New York.

Then, like gold, away went the price to the upside...and less than two hours later, silver was at it's $28.49 spot high tick. From that high, silver got sold down about thirty-five cents before it, too, traded sideways into the close. Silver's intraday move was 98 cents...3.6%.

The silver price finished the Friday trading session at $28.13 spot...down a penny from Thursday. Net volume was also up there...around 30,000 contracts, a big jump from the prior days this past week.

Platinum and palladium had similar types of moves, but far more subdued...and you'd be hard pressed to find the feature on the palladium chart from yesterday.

The dollar index began to rally before the close of trading on Thursday...and that rally continued right up to its Friday high of 82.85...which occurred at 9:30 a.m. Eastern time. Then, during the next ninety minutes, the index dropped 40 basis point...before quickly recovering 10 of that...and then traded sideways from there into the close. The dollar index was actually down 10 basis points on the day.

The big rallies in both gold and silver started about forty minutes before the dollar did its 9:30 a.m. face plant in New York...and the prices of both got capped about ten minutes before the dollar 'crash' ended. I'd guess that what the precious metals prices were doing was completely independent of what was going on in the dollar index. Remember, there are no markets anymore...only interventions.

Like Thursday, the gold shares got sold off in the first fifteen minutes of trading...but then headed higher...and were at their highs by around 11:00 a.m. in New York. They sagged a bit in the early afternoon, but then rallied into the close...and the HUI finished up 0.90%...almost on its high of the day.

With the odd exception, it was all red arrows in the silver equities yesterday...and Nick Laird's Silver Sentiment Index closed down 0.39%.

(Click on image to enlarge)

The CME Daily Delivery Report did not disappoint me yesterday, as 963 gold contracts were posted for delivery within the Comex-approved depositories on Tuesday. The biggest short/issuer was JPMorgan out of its in-house/proprietary trading account, with 902 contracts...and all the rest [61 contracts] are to be delivered by the Bank of Nova Scotia. The big long/stoppers were HSBC USA and Deutsche Bank...with 571 and 326 contracts respectively. Morgan Stanley took delivery of the remaining 66 contracts. One silver contract was also posted for delivery. The link to yesterday's Issuers and Stoppers Report is here.

The GLD ETF reported that an authorized participant added 103,097 troy ounces of gold yesterday...and there were no reported changes in SLV.

While on the subject of these two ETFs, the new short interest numbers for both were posted on the shortsqueeze.com Internet site late on Thursday night. So late in fact, that I never saw them, because I checked twice earlier in the evening, and they weren't there.

What they showed, did not amuse either Ted Butler or myself.

In silver, there was a whopping increase in the number of shares/ounces sold short in this ETF. The short interest blew out by 30.22%...to 14,784,600 shares/ounces, an increase of 3,431,300 shares/ounces from just two weeks ago.

The numbers for gold were equally atrocious. The short interest rose 28.67%...up to 21,749,900 shares sold short, or 2.17 million ounces of gold. That was an increase of 4,846,600 shares, or about 485,000 troy ounces of gold over the two week reporting period.

It was obvious to Ted that rather than go into the market to buy the physical metal and drive the prices up, the authorized participants chose to short the shares in lieu of doing that.

As of the cut-off for this report, GLD is owed just under 68 tonnes of gold...and SLV is owed 460 tonnes of silver. This is what would have to be added to cover all the short positions outstanding in each ETF.

One can only imagine what the prices of both silver and gold would be if the short holders actually had to purchase the metal to cover these short positions.

That's the reason why I wouldn't touch the shares of these ETFs with a 10-foot cattle prod.

Over at Switzerland's Zürcher Kantonalbank, they updated their gold and silver ETFs as of the close of trading on Thursday. Their gold ETF had a smallish withdrawal of 14,567 troy ounces. But their silver ETF added a rather hefty 778,894 troy ounces.

Finally there was a sales report from the U.S. Mint that was worthy of the name. They reported selling 5,000 ounces of gold eagles...1,000 one-ounce 24K gold buffaloes...and another 150,000 silver eagles. Month-to-date the mint has sold 9,000 ounces of gold eagles...3,500 one-ounce 24K gold buffaloes...and 915,000 silver eagles. Based on this sales data, the gold/silver sales ratio sits at 73:1 as of the close of business yesterday.

It was a quiet day over at the Comex-approved depositories on Thursday. They only reported receiving 5,117 ounces of silver...and shipped 71,538 troy ounces out the door. I won't know what Friday's figures were until about 3:00 p.m. Eastern time on Monday, as that's about the time that CME updates that data on its website.

Yesterday's Commitment of Traders Report was a mixed bag. I had expected an improvement in the Commercial net short position in both gold and silver, but only got it 50% right.

In silver there was a small increase in the Commercial net short position...490 contracts to be exact. This position now stands at 21,852 contracts, or 109.3 million ounces of silver. The report also shows that the four largest traders are short 162.8 million ounces...and the '5 through 8' largest traders on the short side, are short an additional 39.1 million ounces.

These eight traders are short 185% of the Commercial net short position and, when the market-neutral spread trades in the Non-Commercial category are removed, the four largest traders are short 34% of the entire Comex futures market in silver...and the '5 through 8' largest traders add another seven percentage points. So...the eight largest traders are short over 41% of the entire Comex futures market in silver.

In gold, there was a decent improvement in the short position from the prior reporting week. The Commercial net short position declined by 9,594 contracts, or 959,400 troy ounces of gold. This short position is now down to 14.64 million ounces. Not the lowest ever, but still a very low number. Ted says that the 'big 4' traders covered short positions aggressively during the reporting week.

Of that 14.64 million ounces, the four largest traders are short 8.66 million ounces...and the '5 through 8' largest traders are short an additional 4.50 million ounces. The eight largest traders are short 13.16 million ounces, or only 89.5% of the Commercial net short position in gold. Compared to silver [at 185%]...gold is practically a 'free market'...LOL!

On a net basis, once the market-neutral spread trades are removed from the Non-commercial category, the four largest traders are short 23.6% of the entire Comex gold market...and the '5 through 8' traders add another 12.3 percentage points to that. So, that means that the eight largest short holders, are short 35.9% of the entire Comex futures market in gold.

These concentrated positions are held by traders that buy and sell as a co-ordinated group, or collusively, as Ted Butler correctly points out. These eight traders on the short side are most certainly the same in both gold and silver. They are short against hundreds of long holders that all act independently of each other...so guess which group controls the price?

Here's Ted Butler's "Days of World Production to Cover Short Positions" chart of the '1 through 4'...and '5 through 8' largest traders of all the physical commodities that are traded on the Comex. It's a graphical representation of what I just spoke of above...and the data comes straight out of yesterday's COT report, but shown in days of world production, rather than in contracts. The chart is courtesy of Nick Laird.

(Click on image to enlarge)

Now for the Bank Participation Report. These are Comex futures positions, both long and short, held by both U.S. and non-U.S. banks at the close of Comex trading on Tuesday...the same time as the COT Report. The data for the BPR is extracted from the COT data, so for this one day a month you can compare apples to apples.

In silver, 4 U.S. banks are net short 20,465 Comex contracts...and you can bet the ranch that JPMorgan holds 80-90% of this position all by themselves...and I suspect that HSBC USA holds almost all of what's left. This amount represents over 93% of the 21,852 contracts of the Commercial net short position shown in the COT report above.

The 13 non-U.S. banks that hold Comex futures contracts in silver are actually net long 828 Comex futures contracts, so their positions are immaterial. As I say every month at this time, the price management scheme in silver is 100% "Made in the U.S.A."

From the July report to the August report in silver, the 4 U.S. banks increased their net short position by 2,193 Comex contracts...and the 18 non-U.S. banks decreased their net long position by 76 contracts. Any questions as to what banks control the silver price?

In gold, 4 U.S. banks are net short 57,689 Comex gold contracts. Although JPM and HSBC USA hold large chunks of this position, they aren't anywhere near as dominant in gold as they are in silver.

The 18 non-U.S. banks that hold Comex futures contracts are net short 40,573 contracts.

Between these 22 banks, they hold Comex short positions totaling 98,262 contracts, or 9.83 million ounces. This represents 67% of the Commercial net short position in gold shown in the COT Report above. The price management scheme in gold is spread out over a lot more banks...and it's obvious that the non-U.S. banks are major players here, but are non-participants when it comes to silver.

From the July report to the August report in gold, the Commercial net short position dropped for both U.S. and non-U.S. banks. The 4 U.S. banks' Comex short position declined by 18,206 contracts...and the 18 non-U.S. banks showed a decline of 9,376 contracts.

In a nutshell, the bullion banks aggressively covered short positions in gold during the reporting month...and JPMorgan stepped in to go further short in the silver market to prevent the price from blowing sky high.

I don't have that many stories for you today, so I hope you have the time this weekend to go through the ones that interest you.

¤ Critical Reads

The Mighty Mississippi to Run Dry?

Due to the worst drought since the 1950s, the Mississippi may be about to go dry.

In Memphis and Vicksburg, the shrinking river is obvious: slower river, exposed river banks, and more sandbars. The water is down more than 13 and 20 feet in each city respectively. The Mississippi on average is about 13 feet below normal—and a whopping 55 feet below where it was at this time last year. On some stretches, the water level is perilously low. On July 17 it was reported that a 100-mile stretch of the Platte River in Nebraska, had dried up.

In fact, water levels are now so low that barge operators are no longer able to operate at full capacity and have to shed both weight and number of towed barges.

Casey Research's own Bud Conrad dug this story up yesterday. It was posted on thetrumpet.com Internet site on Tuesday...and is well worth the read. The link is here.

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Food crisis fears mount as corn price hits record high

Fears of a potential repeat of the 2008 food crisis mounted, after a US government report showed that US crops were being savaged by an intense drought.

Corn prices hit a new record high today on confirmation that the US crop would probably slump by 13pc to a 6-year low.

The last time prices spiked 4 years ago food riots occurred in Egypt, India, Indonesia, Mexico and many other countries.

The US Department of Agriculture (USDA) said that the severe drought occurring in the US meant that this year’s harvest would be 10.779bn bushels, compared with 12.358bn bushels last year.

This story appeared on the telegraph.co.uk website early yesterday afternoon BST...and I thank Roy Stephens for sending it. The link is here.

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U.S. banks told to make plans for preventing collapse

U.S. regulators directed five of the country's biggest banks, including Bank of America Corp and Goldman Sachs Group Inc, to develop plans for staving off collapse if they faced serious problems, emphasizing that the banks could not count on government help.

The two-year-old program, which has been largely secret until now, is in addition to the "living wills" the banks crafted to help regulators dismantle them if they actually do fail. It shows how hard regulators are working to ensure that banks have plans for worst-case scenarios and can act rationally in times of distress.

They told banks to consider drastic efforts to prevent failure in times of distress, including selling off businesses, finding other funding sources if regular borrowing markets shut them out, and reducing risk. The plans must be feasible to execute within three to six months, and banks were to "make no assumption of extraordinary support from the public sector," according to the documents.

This Reuters story was posted on their website early Friday morning...and I thank Donald Sinclair for bringing it to our attention. The link is here.

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The Solution…is the Problem, Part II: Sprott Asset Management

This month's Market at a Glance by authors Eric Sprott and Étienne Bordeleau of Sprott Asset Management, was posted on their website yesterday. It's on the longish side...and I must admit that I've not read it yet, but it's on my 'to do' list later this weekend. The link is here.

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Doug Noland: The Dog That's Not Barking

European economies are spiraling downward, and I expect economic activity to remain largely impervious to monetary stimulus. I don’t believe the Draghi Plan will reverse the crisis of confidence in eurozone debt or the European banking system. And, as I mentioned above, I fear a desperate ECB may increasingly jeopardize the euro (see Mr. Issing’s comments below). Mr. Draghi invoked “convertibility risk” as justification for monetizing government borrowings. Such measures, however, will not allay market fears regarding the sustainability of the euro currency. Increasingly destabilizing capital flight remains a serious risk.

Doug's Credit Bubble Bulletin on Friday is always a must read for me...and this one is no exception. It's posted over at the prudentbear.com Internet site...and I thank reader U.D. for sending it along. The link is here.

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Libor rate overhaul launched by UK regulator

Libor benchmark interest rates are no longer "fit for purpose" and must be changed or replaced, Britain's regulator said on Friday as he set out proposals to restore their credibility.

The initial review by the Financial Services Authority is the first concrete step to reforming Libor after a rigging scandal that has dragged in global banks and hurt the reputation of regulators on both sides of the Atlantic.

The future of other benchmarks - for everything from oil and gold to stock prices - was also under scrutiny, he said.

The London Interbank Offered Rate, known as Libor, sets prices for everything from credit card payments to complex derivatives, but its credibility has been damaged since it emerged that it had been manipulated by the big banks that set it.

This Reuters story was filed from London yesterday morning...and I thank Donald Sinclair for digging it up on our behalf. The link is here.

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The 'Singapore Connection' German Tax Investigators Set Their Sights on UBS

The German state of North Rhine-Westphalia has made headlines by buying data on Swiss bank accounts in a crackdown on German tax evaders. But now they have found evidence that Swiss bank UBS may have helped Germans shift their assets to Singapore before a tax treaty between Germany and Switzerland goes into effect next year.

German investigators who recently purchased data on UBS bank clients have come into possession of documents that show how Swiss banks allegedly help clients transfer their assets to Southeast Asia to evade taxes, according to the Friday edition of the Financial Times Deutschland. "For the first time, we have a paper trail to Singapore," a source close to the North Rhine-Westphalian state Finance Ministry told the newspaper. North Rhine-Westphalia, Germany's most populous state, has led the way in buying Swiss bank customer data in a bid to catch German tax cheats.

The UBS material is apparently so revealing that the investigation into the bank has now become the priority, a source told the FTD, which said that German tax evaders, the original target, were now being regarded merely as "bycatch." The investigators are said to have obtained video material which show "senior (UBS) employees" giving instructions on how German clients can invest their money with the bank in a "tax-optimized" manner -- in other words, keeping it concealed from the tax office. UBS swiftly denied the allegations.

Not a thing surprises me about this bank. This story showed up on the German website spiegel.de yesterday...and it's courtesy of Roy Stephens. The link is here.

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More Power to Brussels? - Germany Considers Holding EU Referendum

Chancellor Angela Merkel wants Europe to move toward an ever closer union in a bid to solve the euro crisis. But she is already pushing at the limits of what is possible under the constitution. The debate about holding a referendum on transferring power to Brussels is gathering momentum in Germany.

Merkel's line is that she wants more Europe, not less. In the chancellor's bid to save the common currency, she is willing to go to the very limits of what is permissible under the German constitution. That was made clear by her support for the permanent euro rescue fund, the European Stability Mechanism (ESM), and her pet project, the fiscal pact. But Merkel still wants more. "We need a political union," she recently said on German public television station ARD. "That means we have to give up further competencies to Europe, step by step, in an ongoing process."

This rather surprising story showed up on the spiegel.de Internet site yesterday...and it's worth skimming. It's another offering from Roy Stephens...and the link is here.

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Turkey’s backing of Syrian rebels leads to danger of Kurdish autonomy

When it comes to Turkey’s policy towards Syria, Ankara might be cutting off its nose to spite its face. As Turkey pushes for Assad’s ouster, chaos on its southern border has seen the possibility of a Kurdish-controlled region grow by the day.

Turkish foreign minister Ahmet Davutoglu’s “zero problems policy” to build strong economic, political and social ties with the country’s neighbors was almost an invitation for disaster.

Once the country moved to provide political support – and reportedly covert aid – to the Syrian opposition that is seeking regime change in Damascus, the blowback was almost immediate.

With millions of ethnic Kurds in Turkey, Syria, Iraq and Iran, destabilization in northern Syria has provided another base for the PKK (Kurdistan Workers’ Party) to launch military operations against Turkey in its struggle to establish an autonomous Kurdish state.

For students of the "New Great Game", this is a must read. It was posted over on the Russia Today Internet site on Wednesday...and I was saving it for today's column. I thank Roy Stephens for sending it our way...and the link is here.

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Big Oil's Unwitting Bid for Kurdish Statehood

The connections between oil, money, and power are very well established. These three factors can elevate individuals to office, give Big Oil companies major sway with national governments, lead countries into war with one another, and influence or control any number of major relationships and conflicts.

But can oil bequeath statehood? It's a chicken-versus-egg question. Sovereign nations control the resource wealth in their lands, but what about the reverse: if a government controls the resource wealth in its region, is it in fact at the helm of a sovereign state?

It may seem a confusing question, but in the autonomous region of northern Iraq called Kurdistan it's a question that deserves some thought. Kurdistan has been a country within a country for years, both part of Iraq and separate from it. The Kurdistan Regional Government (KRG) governs the region, supported by its own armed forces, but the KRG still relies on the central Iraqi government in Baghdad for its budget. It's a reliance of necessity, based on the fact that Baghdad has aggressively retained control over all Iraqi oil revenues, depriving Kurdistan of the oil revenues that would otherwise fill its coffers. And it's a reliance from which Kurds cannot wait to escape.

This essay was written by Marin Katusa, Casey Research's Chief Energy Investment Strategist...and was contained in the Tuesday edition of Casey's Daily Dispatch. It dovetails beautifully with the RT story posted above...and is a must read as well. The link is here.

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China, Japan stretch peace pacts

Asia's two giants, China and Japan, are playing a dangerous game, each indicating they are prepared to use force in defense of islands they both claim as their own.

With a side glance at China expanding its effective control of the disputed Paracel and Spratly islands in the South China Sea, Japan has been taking a stronger rhetorical stand against Beijing to protect its own sovereignty.

Japanese Prime Minister Yoshihiko Noda on July 26 said in the Diet (parliament) that if necessary the Self-Defense Forces (SDF) can be mobilized to defend the contested Senkaku/Diaoyu Islands in the East China Sea, which are controlled by Japan but claimed by China and Taiwan.

This very interesting read was posted on the Asia Times Internet site on Tuesday...and I've been saving it for today's column as well. I thank Roy Stephens for his last offering of the day...and the link is here.

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Two King World News Blogs

The first is with Egon von Greyerz...and it's headlined "We Are Headed Right Into A Global Financial Crash". The second blog is with Nigel Farage. It's entitled "They Will Collapse The System & Enslave People".

View full GSD edition

Draft Russian bill facilitates foreign mining of gold, PGM, diamonds

Russia's ministry of natural resources has drafted a bill that will facilitate the access of companies with foreign capital to mine its gold, platinum group metals (PGM) and diamond reserves, according to documents published on a ministry website.

Russia's gold reserves account for about 10 percent of the global volume, second only to South Africa's, according to ministry data. Its share in palladium accounts for 24 percent of global reserves and in diamonds 35 percent.

But Russia lags behind countries such as Canada, Australia and the United States in exploration and development of minerals, Sergei Donskoi, recently named minister of natural resources, has said.

The draft bill would allow foreign-owned businesses to mine deposits of up to 250 tonnes (about 8 million troy ounces) of gold, five times the existing cap of 50 tonnes set in 2008, without facing additional regulation from the state, the documents showed.

This Thomson Reuters story was posted on the mineweb.com Internet site yesterday...and I thank Donald Sinclair for his last offering in today's column. The link is here.

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Do You Have the Guts to Buy Low and Sell High?: Louis James

It's so outrageously simple that few investors can actually do it: buy low and sell high. The manic highs and lows of the market are actually good news for those investors who have mastered the discipline of buying low and waiting, according to Louis James, the senior editor of the International Speculator and Casey Investment Alert.

In this exclusive interview with The Gold Report, James talks about how not to be fooled into timing the market and how he finds value in precious metals by scouring some knock-out jurisdictions like Mexico and China.

This interview with Casey Research's own Louis James was posted on theaureport.com website yesterday...and the link is here.

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Precious metals markets heating up: John Embry

Gold and silver markets are rapidly heating up, although the casual observer might not know it.

That's because of the blatant price suppression of both metals that's now occurring in the paper markets.

But this obscures the physical off-take now going on behind the scenes, an off-take that's a precursor to an inevitable price explosion.

John's monthly essay for Investor's Digest of Canada was posted on their website on June 29, 2012...and is now posted in the clear over at Sprott.com. Anything that John writes is a must read in my opinion...and this offering is no exception. I thank Australian reader Wesley Legrand for bringing it to our attention...and the link is here.

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Life is like a roll of toilet paper. The closer to the end you get, the faster it goes. - Author unknown

Today's 'blast from the past' is a song by a Winnipeg, Manitoba group that was a big hit both north and south of the 49th parallel back in 1974. It's hard to believe that this recording is almost 40 years young. Where does the time go? I hope you enjoy it, so turn up your speakers and click here.

Well, it was Bill Murray's Ground Hog Day all week long, as the high-frequency traders kept everything under control. The price action was so similar every day, you could have set your watch by it. As Chris Powell so correctly put it...There are no market anymore, only interventions.

However, one thing I have been watching out of the corner of my eye is how the PM share prices have been sneaking higher lately...and I'm encouraged by that.

But what I'm not happy about is the monstrous short position in silver that JPMorgan has now built up in the Comex futures market once again and, like Ted Butler, I'm not a happy camper about the new short positions in both GLD and SLV. Obviously if these events hadn't occurred, we'd be looking at a startlingly higher price for silver...and for gold, too, I would think. As I've said many times before, this blatant price management scheme is now so obvious, that even Stevie Wonder could see it.

I must admit that the possibility now looms larger that JPMorgan et al may engineer another price decline before the summer is out, despite the fact that the Commitment of Traders is wildly bullish for both metals.

Of course I'd be the happiest man in the world if I was proven wrong about all this...but after twelve years of watching these bastards have their way with the precious metal markets, I'm always on the lookout for "in your ear".

That's it for the day...and the week.

See you on Tuesday.