From Ed Steer:

Gold showed a little life in Far East trading on Tuesday morning...and the bottom was in at the usual 3:00 a.m. New York time...shortly before the London open. From there, it edged higher until noon in London. Then, it and silver were off to the races...but both ran into a brick wall shortly after the Comex opened. Gold made another attempt to rally at the London close, but got nowhere...as the same not-for-profit seller was still lurking about. Once Comex trading ended, gold rallied to its high of the day.

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Silver's chart was similar...with its low occurring at the London open. Silver got smacked at the same time as gold...shortly after the Comex open...and from there it went sideways for the rest of the trading day. Even the gold rally at the London close yesterday didn't help it. I was somewhat disappointed that the shares didn't do better, but in the face of the hammering that the Dow took yesterday, I guess we should be thankful for small mercies. The performance of Freeport-McMoran didn't help either...as the stock was down 6.92%.

Open interest for Monday's trading showed that gold open interest fell 1,114 contracts to 350,957...while silver added an insignificant 67 contracts...and total o.i. rose to 94,906.

A fair amount of gold news today. There was a front page (second section) gold story in London's Financial Times on Monday that read "Bullion sales hit record in rush to safety". When stories like that make the front page, we will be in the 'mania' phase...and judging by the way events are unfolding...we probably don't have a lot longer to wait. Apparently [according to Bloomberg] there are close to 10,000 contracts of open interest in April $1,000 gold call options. And if you check the 3-year gold chart below, you will note that we are going to have a rather dramatic 'golden cross'...as the 50-day moving average is about to blast through the 200-day m.a. in rather spectacular fashion.

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Yesterday, the GLD ETF added more huge stacks of gold bars...another13 tonnes in all...that's 413,000 ounces troy. In the past nine days, GLD has added 62 tonnes of gold. That's 2 million ounces...$1.8 billion! This is serious money! To top that off, there was huge volume in the GLD shares yesterday as well, so that most likely means that more gold bars will be added sometime next week. The silver ETF...SLV...showed no changes yesterday. Comex warehouse silver stocks dropped another 840,000 ounces. Talking about the Comex warehouse, Ted Butler pointed out to me that on first day notice for February delivery...the last business day of January...there were about 5,000 contracts to be delivered. This is physical delivery I'm talking about now. Most of the time, the vast majority of these contracts are delivered in the first few days after first day notice. The rest are delivered in dribs and drabs over the balance of the month. Well, as of yesterday, only 2,156 contracts have been delivered so far in February...none at all in the last five business days! Ted says that this is highly unusual...and he's not sure what it means. I'll keep you posted on developments. And lastly is this Reuters story headined "Mexico strike hits Penoles silver, gold refining"...and you can read all about it here.

In other news, I have three Bloomberg stories for you...thanks to the King Report...UBS reported a SF8.1 billion fourth-quarter loss on writedowns and will cut 15,000 jobs world wide by the end of 2009..."Fannie Mae and Freddie Mac, the mortgage-finance companies seized by regulators, may need more than the $200 billion in funding pledged by the U.S. government if the housing market continues to deteriorate, Federal Housing Finance Agency Director James Lockhart said." [Note to James: You said 'may need'...try 'will need' $200 billion...as the bottom in real estate is still at least four years away. Call me in 2013 and we'll talk. - Ed] And lastly..."The euro fell after a Russian bank official said the nation's lenders are in talks with foreign creditors about $400 billion of loans, adding to speculation the financial turmoil in Europe is worsening." [Worsening??? It's terminal! - Ed]

My first contribution of the day is this Bloomberg story headlined "CFTC Should Have Criminal Authority, Commissioner Chilton Says". [Well, Bart...that's all well and good...but you have the two most egregious examples of criminal activity occurring right under your nose right now...crimes in progress...the grotesque concentrated gold and silver short positions of three [or less] U.S. bullion banks...and you and your buddies just sit there with your belly-button lint brushes and do nothing. Don't worry about more power...just enforce the rules you have on the books now...and let the Department of Justice take care of the rest. - Ed] The link is here.

The next story is from zerohedge.blogspot.com. It's entitled "A Glance at the Upcoming Eastern European Cataclysm". I knew that the situation was bad...terminal to be exact...but to see it spelled out 'chapter and verse', is quite something. The graph and chart are worth spending some time on as well. The link is here.

And lastly, in a story in The Independent in the U.K., comes this headline..."This is the worst recession for over 100 years". Finally, a politician has got it right. Ed Balls, Prime Minister Gordon Brown's most senior cabinet minister has finally admitted the obvious. He warns that the "downturn is ferocious and says the impact will last 15 years." Yep, that's a lot closer to the truth. This 'must read' story is linked here.

What strange madness is this? Why would anyone think the economy will be made better off by squandering money now on projects that were deemed unworthy or unaffordable only a few months ago? The country got into trouble because people squandered too much money; now they think they will get out of trouble by letting the government squander money. - Bill Bonner, The Daily Reckoning, February 10, 2009

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Well, the rescue package was a bust. And I hate to say it, but it sure looks like the White House et al dropped the ball big time on this one. From here, I expect things to go from bad to worse really quick...and all the King's horses and all the king's men [or the PPT] aren't going to be able to hold the deluge back much longer. I sure hope you have lots of physical gold and silver.

See you Thursday.

Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.