From Ed Steer:

As per normal, every little rally attempt in early Far East trading in Sydney got firmly sold off...and by the time that London opened for business on Monday morning, gold was down about $12. From there...it and silver rose until about lunchtime in London...the silver fix. Then gold and silver both got sold off again until just before the London p.m. gold fix...which turned out to be the lows of the day for both metals...and then away they went to the upside. Silver's vertical spike at lunchtime in New York got hammered...and gold kind of died quietly at the same time. Gold was never allowed back over $1,000...and silver's new high price [for this move] was not allowed to stand...as both metals finished within a hair of their closing prices on Friday. Volume yesterday, according the usual N.Y. gold commentator, "was 111,100 contracts with a switch effect of 6,700...and 70% of the entire day's volume had been traded by 10 a.m." If you look at the gold chart from yesterday, it's not hard to figure out why that was the case. Although the HUI was down, it certainly put in a respectable performance...all things considered. Here's the P&F chart for silver. Note the bullish price objective. Crossed fingers and some holy water might do the trick!

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Open interest on Friday's big up day in both metals was full of surprises. Gold o.i was up again, of course...but not an overly large amount considering the move...6,651 contracts. Whereas silver o.i. dropped 674 contracts. That normally means silver's rally was most likely short covering in nature...as only that would account for a drop in open interest in the face of such a big up-move. This will be in the COT this Friday. The cut-off for that report is at the close of trading today.

Talking about the Commitment of Traders report...I know for a fact that a lot of readers' eyes glaze over when I start talking about it...and the COT report I link every Friday is just a pile of numbers to most of you. But maybe the two URLs below will help you understand. They are full colour graphic representations of the COT report in both gold and silver going back over the last ten years. You can see everything at a glance...Commercials, Non-Commercials and Nonreportable...both long and short. It shows the ebb and flow of the huge U.S. bank short position as it has built up over the years. The current grotesque Commercial short position is the most obvious thing you will notice the moment you see each graph for the first time. These are graphic-intensive links...and I hope your web browser is up to them. The link for the gold COT report is here...and the silver COT report is here.

In other gold news, I noticed a Bloomberg story posted at Kitco yesterday morning about the South African Krugerrand. The headline read..."Krugerrand Demand Pushes Output of Gold Coins to 23-Year High". “Demand for our blanks is higher than we’ve seen since 1986...Record stock market lows are translating into record highs for gold and Krugerrands,” said Alan Demby, chairman of the South African Gold Coin Exchange, in an e-mailed statement last week. Over in Switzerland, their silver ETF added 1,553,106 ounces last week...and their gold ETF added 144,484 ounces. I thank Carl Loeb for those numbers. And from the web site of The Central Bank of the Russian Federation, I see that they did not add to their gold position in January...which is the first month in a while that they haven't. They're certainly having their currency problems at the moment, so who can blame them. Currently they are sitting on 16.7 million "fine troy ounces"...519 tonnes. Closer to home, the U.S. mint has now stamped out 2,102,500 silver eagles [for February] as of yesterday. Year-to-date, the total is 4,002,500. In gold, one ounce gold eagle production has now reached 101,500 for the month so far...and 193,500 year to date. And for only the third day this month...GLD had no gold added to it. SLV had a largish 4.93 million ounces added. The total is up to 263 million ounces...8,178 tonnes. There was huge volume in both ETFs yesterday as well....which means that more gold and more silver [they're still short 15+ million ounces according to Ted] will have to be added.

One more thing today. I've been talking about JPMorgan and HSBC USA being the big gold and silver shorts. That's true...but the percentages I was using were incorrect. Yesterday I got my hands on the third quarter precious metals derivatives report for U.S. banks...and these are the actual percentages...Bank of America - 0.3%, Citigroup - 2.0%, HSBC USA - 19.1%, JPMorgan 78.5%. All the other reporting banks (hundreds of them) hold an insignificant 0.2% divided up between them. So...JPMorgan, HSBC USA and Citigroup hold 99.5% of all precious metals derivatives positions by all U.S. banks. Any further questions?

In other news, I see in a story posted in the N.Y. Times that "Latvia's center-right coalition government collapsed Friday, a victim of the country's growing economic and political turmoil." And in a Bloomberg story, I see Hillary C. was over in China urging them to keep buying U.S. Treasuries...and in another Bloomberg story, I see that Dubai's Department of Finance has begun "a long-term debt program with a sale of $10 billion of bonds to the central bank of the United Arab Emirates. The emirate will sell $20 billion of securities under the program." Then there was this story posted at google.com..."Dublin (AFP) — Up to 120,000 protesters brought Dublin city centre to a standstill on Saturday over government austerity measures aimed at stabilising the once high-flying economy now wracked by recession." And lest I forget...AIG, currently sitting at $0.53/share...is going to be looking for more Fed aid as they hint they may lose another $60 billion.

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It's been three days since my last report...and I have four stories for you this morning. The first one has already been all over the Net...but in case you missed it, here it is. It's from Reuters...and in it, George Soros said "the turbulence is actually more severe than during the Great Depression," comparing the current situation to the demise of the Soviet Union...."We witnessed the collapse of the financial system." This very short article is headlined "Soros see no bottom for world financial "collapse". It's a must read and the link is here.

The second story is from Ambrose Evans-Pritchard at The Telegraph. It's an eye-opener...and, of course, it's a must read as well. It's entitled "Will Germany deliver on the Faustian bargain that created monetary union?"..."If Der Spiegel is correct, the German finance ministry is drafting rescue plans to prevent default on the edges of the eurozone leading to a full-blown collapse of Europe's monetary system"...and the link is here.

The next story is from The Guardian in London...and is certainly a sign of the times...and who can blame them. This sort of phenomena will soon be a familiar sight all over the world. The headline reads "Britain faces summer of rage - police"..."Middle-class anger at economic crisis could erupt into violence on streets." Another must read...and the link is here.

And lastly...I never thought it would happen...but Ted Butler finally got enticed to leave Florida and give a speech at the Phoenix Silver Summit this past weekend. I'm already working on him to show up in Vancouver in June. I'll let you know how I make out. Here's the copy of his speech which is entitled "Silver: Past, Present...and Future". The link is here.

The world financial system has effectively disintegrated...there is yet no prospect of a near-term resolution to the crisis. - George Soros, Reuters...20 February 2009

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Yesterday was another bad day for the stock market. Today is options expiry for both gold and silver for March...and first day notice for March delivery is on Friday. There are still some contracts yet to deliver in February gold. March is not a big delivery month for gold, but it is for silver. Will the U.S. bullion banks pull the pin...or will nothing much happen? Nobody knows...but we'll find out soon enough. The rest of this week is going to be interesting.

See you on Wednesday morning.

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