It was another lackluster trading day in gold...trading mostly sideways right up until about ten minutes before the Comex open in New York. A rally of sorts developed from there, but that ran out of gas...or into a willing seller...right around 9:00 a.m. Eastern, and that was the high of the day.

From there it trended down until the London p.m. gold fix...and from that point, the gold price got sold down a bit more than ten bucks, but that was probably attributable to the move in the dollar index. It recovered a hair from that before trading mostly sideways into the close of electronic trading.

Gold finished at $1,655.30 spot...down 80 cents. Volume was around 101,000 contracts...most of it of the high-frequency trading variety.

It was pretty much the same for silver, but after the 8:45 a.m. Eastern high...$31.04 spot...the sell off in silver was far more vicious, with the absolute low of the day coming at precisely 12:30 p.m. in New York...long after gold's low was in. The low tick was $30.13...a 3.0% intraday move.

The subsequent rally didn't go far...and from 2:30 p.m. onwards, the silver price traded sideways into the 5:15 p.m. Eastern electronic close.

For the fourth day in a row, attempts [two in all] to break above...and stay above...the $31 spot price were sold off the instant they occurred. No 'for profit' seller ever sells like this into a rally...ever! It's my bet that we're looking at an interim top at this price.

Silver finished the Thursday session at $30.44 spot...down 29 cents from Wednesday. Gross volume was huge once again because of roll-overs...but net volume was still pretty decent at around 29,000 contracts, as there was lots of trading in the new front month for silver, which is December.

Here's the New York Silver Spot [Bid] chart for silver on its own. Note the precision of the 12:30 p.m. low tick. This was not a random event.

The dollar index opened around 81.55...and then traded a bit lower from there...bouncing off the 81.43 mark several times right up until the 10:00 a.m. Eastern time London p.m. gold fix. Then in less than an hour the index rallied about 30 basis points...and then traded more or less sideways into the 5:30 p.m. Eastern close.

The index closed 81.72...up a whole 17 basis points on the day. I suppose one can attribute the gold price action to the dollar index move...but silver seemed a little overdone...especially when the actual low of the day came an hour and forty minutes after the dollar index rally ended.

As you already know, silver is l'enfant terrible for JPMorgan et al...and this was an opportunity not to be passed up. And they didn't. I'm also curious as to why the dollar index would rally out of the blue at precisely the time of the London p.m. gold fix, as I didn't hear any news that might have caused that. If you heard anything, please let me know.

The gold stocks opened barely in positive territory, but that all ended the moment that gold got hit just a few minutes after the London p.m. gold fix. Not surprisingly, the shares hit their nadir at 10:50 a.m. Eastern, gold's low price tick...and after that, every attempt by gold shares to rally significantly, got sold off in a pattern very similar to what was going on with the gold price at the same time. The HUI finished down 0.73%.

Of course the silver shares didn't do particularly well, either...and Nick Laird's Silver Sentiment Index finished down another 0.95%.

(Click on image to enlarge)

As I mentioned in this space yesterday, the CME's Daily Delivery Report did show a handful of gold contracts still outstanding for August...seven in all...and they will be delivered today.

First Day Notice for the September delivery month showed that 590 gold and only 292 silver contracts were posted for delivery on Tuesday, September 4th. In gold, the big short/issuer was JPMorgan in both its client and proprietary trading accounts. They issued 578 contracts of the total amount...and the biggest long/stopper by far was the Bank of Nova Scotia with 507 contracts.

There were only two short/issuers in silver...Jefferies with 153 contracts...and JPMorgan in its client account for 139 contracts. The largest long/stopper was JPMorgan with 130 contracts in its proprietary trading account...and 101 in its client account. The other nine long/stoppers accounted for the rest.

I was somewhat surprised that more silver contracts weren't posted for delivery on first notice day...but this isn't the first time that a major delivery month has started off slowly. As a matter of fact, it's almost becoming the 'new normal'. The rest of the delivery month should prove interesting. The link to yesterday's Issuers and Stoppers Report is here...and it's definitely worth a look.

There were no reported changes in GLD yesterday...but the big surprise was SLV. They reported a third withdrawal this week. This time it was 1,356,720 troy ounces. Since the silver rally began two weeks ago, SLV has shown a net decline of about 198,000 troy ounces of silver...and GLD has added 475,181 ounces of gold, with no withdrawals at all. Are silver supplies getting a little tight out there, or is it just Ted and I that are thinking that way?

I had a chat with Eric Sprott yesterday...and the first question out of my mouth was how long did it take to get the seven million ounces that PSLV purchased in the last offering. Eric said it took about two weeks. The next question was about the amount of silver purchased. I'd heard that it was eight million ounces, but Nick Laird and I could only come up with seven million received so far. It appears that Sprott is sitting on some of the cash received in case there is a price correction...and redemptions. If this scenario doesn't materialize within a reasonable period of time, I get the impression that Eric will pull the trigger and purchase more silver.

There was a smallish report from the U.S. Mint yesterday. They sold another 1,000 ounces of gold eagles...and 55,000 silver eagles. That may be the mint's final sales report for August. I must admit that with such a big rally in silver during the prior reporting week, I'm somewhat surprised that silver eagles sales weren't a bit higher for August than they show at the moment, which is 2,575,000. We'll see if that changes today...or on Tuesday.

The Comex-approved depositories didn't show a lot of activity on Wednesday. They reported receiving 199,812 ounces of silver...and shipped a smallish 10,212 troy ounces out the door. The link to that activity, is here.

The photo below was one of many that Australian reader Wesley Legrand sent my way yesterday.

(Click on image to enlarge)

I had an interesting question from reader L. Grapentine yesterday...and I thought his question and my reply were worth sharing. As a set-up to the exchange, I had mentioned that the Comex-approved warehouses on one day earlier this week had only reported receiving one good delivery silver bar that weighed 958.100 troy ounces. It was this comment that prompted the following exchange...and I've greatly expanded on my answer now that I'm posting it in the public domain...

LG: I found it extremely interesting (and disconcerting) that a good delivery bar could be only 958 ounces. By how much may good delivery bars vary in weight, and are contracts settled by a fixed number of good delivery bars, or is the weight differential resolved in some way? If such differences are otherwise settled, how is that?

ES: A good delivery bar varies in weight...and a silver contract is 5 good delivery bars, with each bar weighing approximately 1,000 troy ounces. The contract is settled in the exact bar weights exchanged...and the weights to the nearest tenth of a troy ounce is stamped on every bar, but we always round off the numbers when we talk about them on the Internet...1,000 oz/bar.

I Googled 'good delivery bar'...and this is what popped up from Wikipedia...and it's worth reading, regardless of what you think you know, or don't know.

I thank Mr. Grapentine for prompting me to take action in this area...as it's something I should have done years ago.

With everything winding down for the last long weekend of the summer in the Northern Hemisphere...there has been next to nothing out there in the way of hard news. I'm happy to say that I don't have that many stories today...and that suits me just fine.

¤ Critical Reads

Harvard Cheating Probe Under Way for About 125

About 125 Harvard University undergraduates are being investigated for cheating on a final exam earlier this year, the most widespread academic misconduct scandal known at the school, college officials said.

All of the students, who were in a class of more than 250, will face hearings before Harvard’s Administrative Board, Jay Harris, dean of undergraduate education at the Cambridge, Massachusetts-based school, said today in an interview.

Harvard professors probed the incident with months of reading through the take-home exams beginning in May, Harris said. Students found to have violated university rules may be required to withdraw from school for a year, Harvard said in a statement.

“These allegations, if proven, represent totally unacceptable behavior that betrays the trust upon which intellectual inquiry at Harvard depends,” Harvard President Drew Faust said in a statement on the college’s website.

This story showed up on the Bloomberg website yesterday afternoon...and I thank Elliot Simon for sending it. The link is here.

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Citigroup pays £373m to settle debt claims

The class-action suit, which was filed in New York in 2009, accused Citi of employing a “CDO-related quasi-Ponzi scheme” to conceal the growing risks on its balance sheet from the mortgage-backed debt and collateralised debt obligations (CDOs) it owned. Citi told the investors that the CDOs had been sold when, in fact, the bank still remained liable for any losses the products suffered, the lawsuit claimed.

The settlement is one of the largest to emerge from the financial crisis and comes almost four years after Citi turned to the US taxpayer for a $50bn bail-out. Fears about the health of the bank’s balance sheet had sent its shares tumbling following the demise of Lehman Brothers in September 2008, eventually forcing then US Treasury Secretary Hank Paulson to step in.

Citi, which denies the investors’ allegations, said it had settled to avoid a protracted legal fight. “This settlement is a significant step toward resolving our exposure to claims arising from the period of the financial crisis,” the bank said.

This isn't a fine...it's another licensing fee. This story was posted on the telegraph.co.uk Internet site late on Wednesday evening...and I thank Donald Sinclair for finding it for us. The link is here.

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Financial crisis: the printing press has reached its limits

Central bankers may have averted outright disaster, but they are powerless to do more.

Few jamborees excite financial markets as much as the symposium of international central bankers which is held annually in late August at Jackson Hole in the Rockies.

Interest this year focuses around whether, with the American recovery again running out of steam, the US Federal Reserve is about to signal a further round of quantitative easing, marking the third such burst of money-printing in that country since the crisis began.

Yet it is also fair to say that the gathering no longer holds quite the same cachet it used to. Faith in central banks as guarantors of macro-economic stability has been shaken to breaking point by the events of recent years, a crisis which they utterly failed to see coming, still less were able to prevent.

This is another story from The Telegraph...this one from yesterday evening...and it's Roy Stephens first offering of the day. It's certainly worth reading...and the link is here.

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EU commission gears up for banking union legislation

Legislation to establish a banking union for the eurozone will be tabled on 12 September, European Commission President Jose Barroso said in a speech Thursday (30 August).

Speaking at the Aspbach Economic Symposium in Austria, President Barroso described the step, which is expected to see the Frankfurt-based European Central Bank given extensive powers to supervise and intervene in the European banking system, as "the next concrete and immediate deliverable of our vision to generate confidence in the future of the euro area".

However, with Britain and other non-eurozone countries likely to opt-out of the system, the union is expected to focus on the single currency areas.

I'll believe it when I see it. This story was posted on the euobserver.com Internet site yesterday...and is Roy's second offering in today's column. The link is here.

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Assault on Google News: Berlin Cabinet Approves New Web Copyright Law

The government of Chancellor Angela Merkel wants to require Google and other aggregators to pay for reproducing content from news websites. Her cabinet on Wednesday agreed on a draft law that would impose a fee even for tiny snippets of text. Web activists are outraged.

Google News, of course, looks not unlike the homepage of a standard newspaper. It is divided into sections, some articles have short teasers to pique the interest of readers and photos illustrate the stories of the day.

If Chancellor Angela Merkel gets her way, however, that may soon change in Germany. Her cabinet on Wednesday agreed on a draft law that would require Google and other news aggregator sites to pay publishing houses a fee when they take snippets of articles for reproduction on their site.

"Publishers should be better protected on the Internet," reads a statement from Justice Minister Sabine Leutheusser-Schnarrenberger posted on the homepage of Germany's Justice Ministry. "They will now receive a tailor-made copyright law for their online presence."

If this isn't the thin edge of the wedge...I don't know what is. This story was posted on the German website spiegel.de yesterday...and I thank Roy Stephens once again for digging it up on our behalf. The link is here.

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Greece's €11.5bn austerity measures 'will be the last', promises PM Antonis Samaras

Samaras, who is struggling to get his uneasy coalition partners' full support for the €11.5bn (£9bn) in cutbacks, argued that economic reforms and privatizations would restore growth after four years of deep recession.

"This is the last such package of spending cuts," Samaras told a meeting of his conservative party's officials. "The Greek economy can take no more."

Samaras' promise will sound familiar to Greeks, as previous governments have offered - and broken - similar pledges during more than two-and-a-half years of harsh austerity measures designed to curtail huge budget deficits.

"Many of these cutbacks are difficult, painful," Samaras said. "But they are also inevitable. For without them the country would return to zero credibility and effectively leave the euro. Which would ... destroy the country."

We've heard this all before...and we'll hear it all again further down the road. This story was posted on the telegraph.co.uk Internet site during the London lunch hour...and I thank Roy Stephens for his final offering in today's column. The link is here.

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Japan plans to cut state spending, could run out of money in a month

Japan's government is planning to suspend some state spending as it could run out of cash by October, with a deficit financing bill blocked by opposition parties trying to force Prime Minister Yoshihiko Noda into an early election.

The impasse in Japan's parliament has raised fears among investors that the world's third largest economy is being driven towards a "fiscal cliff", Reuters reported.

"The government running out of money is not a story made up. It's a real threat," Finance Minister Jun Azumi told a news conference, making a last-ditch appeal for cooperation by opposition parties to pass the bill.

"Failing to pass the bill will give markets the impression that Japan's fiscal management rests on shaky ground," he said.

This story was posted on The Telegraph's website very early this morning BST...and Roy Stephens slid this into my in-box when I was looking the other way. The link is here.

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Ambrose Evans-Pritchard: China’s fears grow over eurozone crisis

China has expressed deep alarm at the escalating crisis in Europe and warned against austerity overkill as Europe's crumbling demand sends shock waves through Asia.

Premier Wen Jiabao told German Chancellor Angela Merkel that Europe must "strike a balance" between fiscal tightening and measures to promote growth. "Europe's debt crisis has continued to worsen, giving rise to serious concerns in the international community. Frankly, I am also worried," he said.

His comments mark a shift in Chinese policy. Beijing has until now backed austerity across Euroland, but the severity of China's own downturn has begun to rattle policymakers.

Exports of electronic goods to Italy crashed 43pc in July from a year earlier, and sales to Germany fell 11pc. Caixin reported that processing trade to Europe fell 21pc.

The country's two largest shipping groups COSCO and China Shipping both reported a drastic losses today. The Shanghai composite index of stocks threatened to break below 2000 today, the lowest since the Lehman crisis.

This must read AE-S story was posted on The Telegraph's website last evening...and I thank Manitoba reader Ulrike Marx for sharing it with us. The link is here.

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Two King World News Blogs

The first is with Egon von Greyerz...and it's headlined "Investors Assets to be Stolen in the Coming Collapse". The second blog is with Peter Schiff. It's entitled "The US Will Be On A Gold Standard In 12 To 24 Months".

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Gold standard: Could it return in the US?

For many years, calling for "a return to the gold standard" in the United States put you in the company of economic eccentrics and the libertarian, Congressman Ron Paul. But this week, the Republican Party agreed to set up a commission to look into fixing the gold value of the dollar. Why?

The usual reason given for a return to some kind of gold standard is that gold leads to sound money. It links the supply of money to the supply of gold and since gold reserves increase only slowly, the growth in the supply of money is limited, thus helping to choke off causes of inflation.

The problem is that in practice, things do not always work out like that - from 1919 to the 1930s, US prices were anything but stable.

Kenneth Rogoff, an economics professor at Harvard University, agrees that a gold standard would not necessarily be more stable than the current monetary system.

This bbc.co.uk essay was posted on their Internet site yesterday...and I thank reader Andrew Holland for sending it. The link is here.

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Gillian Tett: Time for eurozone to reach for the gold reserves?

Is it time for some eurozone governments to start selling that metaphorical family silver? Or, more specifically look at their all-too-real gold reserves, to find a solution to Europe's crisis?

That is a question which has recently been buzzing around in some policy making and investing circles. For as autumn looms, it is clear that the eurozone remains under profound stress. However, it is also unclear whether the European Central Bank -- let alone the eurozone politicians -- will really be able to do anything soon to ease market fears and lower those borrowing costs.

Thus, as unease builds, the World Gold Council -- or the body that represents the gold industry -- has recently lobbed a new idea into the fray: It thinks it is time for eurozone governments to start using gold in a creative manner, particularly in places such as Italy, to cut those interest rates.

This story was posted in the Financial Times yesterday...and is posted in the clear in this GATA release. It's worth reading...as is Chris Powell's short one-paragraph preamble. The link is here.

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Malema threatens revolution at mines

Expelled ANC Youth League leader Julius Malema on Thursday promised to lead a revolution which he said would make all mines in the country ungovernable.

“We are going to lead a mining revolution in this country... We will run these mines ungovernable until the Boers come to the table,” he told workers at the Aurora mine in Grootvlei, Springs.

“We want them to give you a minimum wage of R12,500. These people can afford R12 500. Mining in South Africa amounts to trillions of rands.”

This guy is going to cause South Africa a pile of grief by the time he's gets through it. This story was posted on the iol.co.za website early this morning South Africa Time...and I thank Ulrike Marx for her second and final offering in today's column. It's worth reading...and the link is here.

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Thursday was pretty much the same as Wednesday, with the rallies beginning in noon in London...and getting capped a couple of hours later, shortly after the Comex opened for business. The only glaring difference was the beating the got laid on silver...but you already know the reason for that.

Today we get the latest Commitment of Traders Report for positions held at the close of Comex trading on Tuesday. And as I've said several times already this week, the last two days of last week's price rally...Wednesday and Thursday...will be in this report, and we'll see what the lay of the land is when it comes out at 3:30 p.m. Eastern time. I'm not expecting it to make for happy reading, but you just never know, as last week's report was a bit of a surprise.

With all eyes on Jackson Hole today...and what "Helicopter Ben" may [or may not] say...I must admit that I'm expecting the worst, while hoping for the best. I had reader Alison Hriley ask me the following question yesterday..."Hi Ed, Could you possibly expound a bit...or better...a lot, on what you anticipate of a price correction? Thanks."

In answer to that, I can certainly do no better than what silver analyst Ted Butler had to say to his paying subscribers in his mid-week commentary on Wednesday..."There is no doubt that the COMEX total commercial net short position has risen sharply in both silver and gold. This creates the risk of a sharp sell-off. It doesn’t mean we must sell-off, just that the risk of that has increased. Seeing how the big 50-day moving average in silver is $3 below the current price, it’s not hard to grasp the dimensions of a potential sell-off."

Then there's the not-so-little matter of the huge short position in SLV that would also be in the sights of JPMorgan et al. They would certainly use any engineered price decline to cover short positions in this ETF with both hands...and based on current activity levels, I'd guess that their short positions are considerable.

I'd be delighted to be wrong about this, as would Ted, but if I had to bet a dollar...I'd bet that we go down before we go up. But as I also said, this price correction...if it occurs...should be bought.

Here's the 6-month silver chart..and you can plainly see that the silver price was capped at the $31 spot price all week long...and both the RSI and MACD are showing signs of rolling over, or topping out.

(Click on image to enlarge)

Below is the 3-year silver chart to put our current overbought situation into a longer term perspective. We could go down or up from here based on past history...but what will ultimately happen depends entirely on JPMorgan et al. They are totally in the driver's seat here...unless there's something going on behind the scenes in the supply/demand equation that we aren't privy to. If that's the case, then past history won't be of any use at all. So we wait.

(Click on image to enlarge)

Nothing much happened in Far East trading on their Friday...and the same can be said for what's happening in early London trading as well...although both metals are now inching higher in mid-morning trading as I hit the 'send' button at 5:10 a.m. Eastern time. Volume in gold is about the same as it was this time on Thursday morning...very light. Silver's volume is also very light...and all the trading is now in the new front month, which is December. The dollar index, which hadn't been doing much up until the London open, is now down about 15 basis points.

With this being the Labour Day long weekend in North America, I'm sure that trading activity will slow down considerably once lunchtime on the East Coast rolls around, as everyone will want to get out of the office early, regardless of what Bernanke has to say.

Before heading out the door, most of you may already have heard that we have a new writer at Casey Research...and his name is Dennis Miller. He's been a regular reader of my column for many years...and now he's working for Doug. Dennis is retired...and has been working tirelessly to rebuild his nest egg since the crash of 2008, when his CDs were recalled and it was cut by 50%. He's documented his journey in his book Retirement Reboot...and he thinks highly enough of what I've had to say over the years, to mention my name in a couple of places in it. The book is priced at a pittance...a mere $9.95...and you can find all about it here. It costs nothing to check it out.

That's all for today...and be sure to check the sky tonight for August's blue moon.

Enjoy your long weekend, if you get that holiday...and I'll see here tomorrow.