U.S. could be solvent again with gold at $5,500: Jim Rickards

Wednesday trading in the Far East and London turned out to be a non-event... and New York opened yesterday just about where it closed on Tuesday afternoon. But that changed at 8:45 a.m. as serious buying showed up and gold rallied for the next four hours... topping out at its high price of the day at $1,154.40 spot at 12:45 p.m. After the high was in, gold drifted down about six bucks into the New York close of electronic trading at 5:15 p.m.

Silver's price action was about the same... but more 'volatile'. And it seemed like every time that silver was really about to break out to the upside...there was an eager seller around to drop it back down again. Silver's high tick of the day [$18.27 spot] came at precisely 2:00 p.m. Eastern time.

The gold price has been rising in the face of a dollar that's been doing more or less the same thing for the last four trading days. That, in and of itself, is encouraging... and it's been happening more and more frequently since gold's high back in the first week of December. One can only wonder where gold and silver might end up if a serious decline in the U.S. dollar got underway. Here's the chart of the last four days of dollar trading.

The HUI put in another very solid performance yesterday... and the stocks gave back very little of their gains once the high of the day for gold was in at 12:45 p.m. The HUI was up 3.12% by the time trading ended at 4:00 p.m. Eastern time yesterday.

The open interest numbers for Tuesday were just about as bad as I expected they would be. Gold o.i. was up a chunky 16,336 contracts on volume of 136,574 contracts. Silver's o.i. was up 1,321 contracts on volume of 35,468 contracts. These numbers should be in tomorrow's Commitment of Traders report. But as bad as Tuesday's numbers were... they will pale in comparison to the open interest increases we'll see for Wednesday when they're posted at the CME's website later this morning. This rally is not going unopposed. Ted Butler's only concern is that JPMorgan is one of those bullion banks that's piling on the short positions against the spec longs pouring into this market. Friday's Commitment of Traders report [and Bank Participation Report] should shine more light on the situation.

The CME Delivery Report showed that 68 gold and 49 silver contracts have been posted for delivery on Friday. The GLD showed an increase of 29,368 ounces... and there were no changes in SLV or the U.S. Mint. But over at the Comex-approved depositories, they reported that 107,168 troy ounces of silver were withdrawn.

Today's first story is one I stole from the usual New York gold commentator. It is clear that the Vietnamese authorities have redoubled their efforts to reduce the extremely high local usage of gold as currency. The story appears at vnnnews.net... and bears the headline "Central Bank Ponders Controversial Halt on Gold"... and the link is here.