Gold saw its low price of the day about two hours after trading began in the Far East on Wednesday morning...around $1,395 spot the ounce. From that point, it struggled to back to $1,403 spot by 9:30 a.m. in New York. Then the gold price popped for a quick ten bucks...and worked its way up to the high of the day at $1,417.80 spot just before 1:00 p.m. Eastern.

From that high, gold got sold back down to $1,408 spot by 2:30 p.m...and gained $4 of that loss back by the close of trading at 5:15 p.m. Eastern.

I wouldn't read too much into yesterday's price action, but I'm happy to see the gold price on the right side of the $1,400 mark.

The silver price pretty much mirrored what happened in the gold market. Silver's low occurred around 1:00 p.m. Hong Kong time...and its high tick at $33.81 spot was at 10:30 a.m. in New York. From that high, it got sold off about two bits going into the close of electronic trading.

Silver was the star performer of the day...finishing up 1.45%. Gold was up 0.91%, platinum was down 0.17%...and palladium got it in the neck for the second day running...down 2.88%.

The world's reserve currency opened the Wednesday trading day around 77.80...and by the time the New York close rolled around about twenty-four hour later, the buck was down about 40 basis points.

Here's the 3-year dollar chart. It's not very happy looking...is it?

The gold stocks gapped up a bit at the open...and hit their highs around 11:00 a.m. Eastern. From that high, they worked their way slightly lower, but the HUI still managed a gain of 1.79%. The silver stocks did equally as well, if not a little better...and a few of them were real standouts to the upside. Without a doubt, the rather subdued performance of the precious metal stocks was exacerbated by the second down day in a row on Wall Street.

The CME Delivery Report was a bit of a surprise, as 469 gold...and a very large 107 silver contracts...were posted for delivery on Friday. Merrill was the big issuer in both gold and silver...and I can't recall their name being up in lights at this time of the month...as they normally show up during the first few days after First Day Notice...not to be heard from again until the next delivery month. Besides Merrill, it was the same three suspects in the 'issuers and stoppers' category.

The other thing of note about the report is that silver deliveries in February are now up to 562 contracts, which represents 2.81 million ounces of the stuff. February is not a traditional delivery month for silver, so these deliveries stand out a bit. The delivery data is worth a look...and the link is here.

For a change, there was no report from the GLD ETF yesterday. Considering the fact that the fund has been bleeding gold since the third week of December 2010...I guess you could consider 'no change' as a positive.

Over at the SLV ETF it was a different story entirely. After shipping 5.66 million ounces of silver out the door on Tuesday, they brought in an even larger 7,470,010 troy ounces on Wednesday. I'd love to be a fly on the wall in their inventory management office.

For the seventh day in a row, the U.S. Mint had a sales report...so business is obviously quite brisk. They reported selling another 7,000 ounces of gold eagles, along with a smallish 39,000 silver eagles. Month-to-date, gold eagle sales total 83,500 troy ounces...along with 2,638,500 silver eagles. Are you getting your share???

The Comex-approved depositories didn't show much activity on Monday...and there was even less to report on Tuesday. The grand sum of their activity came in at 7,259 troy ounces of silver received at their Delaware warehouse.

¤ Critical Reads

Is this the start of the second dotcom bubble?

I'm going to start today's stories off with this item that was sent to me by Swiss reader G.B. It showed up in the Sunday edition of The Observer. Loss-making Twitter has been valued at $10bn. Facebook is said to be worth more than Ford. Zynga, the social-network games company that has tempted millions to grow virtual vegetables in its FarmVille game, has been valued at $9bn (£5.54bn). Now, for some investors, the alarm bells are starting to ring. Alan Patrick, co-founder of technology consultancy Broadsight, says we are at the beginning of another bubble and that the first breaths have been blown. All the warning signs are there...and it's worth running through. Link here.

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Providence To Teachers: You're Fired

Here's the first of three stories from reader Mike Molleur. This one is posted over at businessinsider.com. The Providence, Rhode Island school district plans to send out dismissal notices to every one of its 1,926 teachers, an unprecedented move that has union leaders up in arms. Since the full extent of the potential cuts to the school budget have yet to be determined, issuing a dismissal letter to all teachers was necessary to give the mayor, the School Board and the district maximum flexibility to consider every cost savings option, including reductions in staff. State law requires that teachers be notified about potential changes to their employment status by March 1st. You can't make this stuff up. Linked here.

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Troubled banks rise to highest level in 18 years

Here's a story from reader Scott Pluschau that was posted over at cbsnews.com yesterday. The number of banks at risk of failing made up nearly 12 percent of all federally insured banks in the final three months of 2010, the highest level in 18 years, as the number of banks on its confidential "problem" list rose to 884 in the October-December quarter, up from 860 in the previous quarter.

You can pretty much bet that the real problem list is a couple of orders of magnitude larger than that. The link is here.

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Hey, Hoenig, those oversize banks are rigging markets for your boss

GATA's Chris Powell provides the headline to the following Bloomberg piece that's headlined "Fed's Hoenig Says U.S. Should Break Up Largest Financial Firms".

Federal Reserve Bank of Kansas City President Thomas Hoenig said U.S. regulators should avert another crisis by breaking up large financial institutions that pose a threat “to our capitalistic system." Koenig is convinced that the existence of too-big-to-fail financial institutions poses the greatest risk to the U.S. economy. He went on to say that "we cannot let large organizations put our financial system at risk." He's right about that, of course...but who's going to do it? Linked here.

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Pensions and health care pledges put UK at 'extreme risk' of another economic crisis

Here's a story from yesterday's edition of The Telegraph that was sent to me by Australian reader Wesley Legrand. The above headline pretty much describes the situation in all western countries these days...and has been a recognized problem for many years. Now it's a problem in Britain as well.

Higher taxes, more spending cuts and longer working lives will be needed to prevent the country "going bankrupt", risk analyst Maplecroft warns in its annual Fiscal Risk Index. The UK ranks 10th out of 163 countries, a rise of 16 places from last year, but is considered to be in less danger than Germany, France, Italy and Japan. Linked here.

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Brent Crude Passes $110

The next offering today is a zerohedge.com piece from yesterday morning courtesy of reader Mike Molleur. T.D. says "A $10 move in a week is just what the doctor ordered to destroy the last trace of surrealism in the whole "economic recovery" story. As we've been saying since December, a rapid move in oil will undo years of carefully planned propaganda and money printing.

Not to be forgotten in all of this is the fact that West Texas Intermediate is closing in on $100/barrel. Link here.

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Oil could hit $220 a barrel on Libya and Algeria fears, warns Nomura

Roy Stephens is to be thanked for this next piece. It was an Ambrose Evans-Pritchard offering that was posted late last night over at The Telegraph. Libya's descent into civil war has led to drastic cuts in oil shipments and prompted warnings that an escalation of the crisis could see Brent crude prices double to $220 a barrel.

Nomura's commodity team said oil prices risk vaulting to uncharted highs over coming weeks if chaos hits Algeria as well, reducing global spare capacity to the wafer-thin margins seen just before the first Gulf War. Link here.

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Doug Casey: Something Wicked This Way Comes

This week's Conversations With Casey delves deeply into the current problems in the Middle East...and compares it to the goings-on elsewhere in the world...including what's happening in the United States. Doug says that on a deep level, there is a common thread running through these events. This is an absolute must read from one end to the other...and the link is here.

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Russia may extend grain export ban

Here's another story from reader Mike Molleur that's posted over at google.com.

On Tuesday, Russia said it may extend a ban on grain exports that has been blamed for triggering global food price rises beyond its provisional expiry date of July 1st. The Russian government's point man on agriculture emerged from a closed-door cabinet meeting chaired by Prime Minister Vladimir Putin to announce that such an option had been discussed. First Deputy Prime Minister Vitkor Zubkov refused to disclose further details while stressing that no formal decision had yet been reached. This is worth the read. Linked here.

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Gold Cheap Versus Oil Signals Bullion to Rally

Here's Mike Molleur's last offering of the day. It's a Bloomberg piece...and the first of only two precious metal-related stories that I have for you today. Gold, trading near a record high, will outperform oil as surging inflation underscores the metal’s role as an investment hedge, according to Credit Suisse Group AG.

An ounce of gold buys far fewer barrels of oil now than it did two years ago. The metal's relative cheapness may dissipate in the coming months as gold is used more as a hedge against inflation according to Credit Suisse's Stefan Graber. It's a short piece...and well worth your time. The link is here.

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Robbed! - Safely Storing Your Gold

Today's last gold-related story is a contribution by Casey Research's BIG GOLD editor, Jeff Clark...and is contained in yesterday edition of Casey's Daily Dispatch. Last week I ran a story from British Columbia here in Canada about a home invasion where thieves used physical violence to get a man to open his safe so they could steal all his silver bullion. The story that Jeff tells here is somewhat similar...but with a twist.

As a result of what happened last week in B.C...I made arrangements with a local armored car company here in Edmonton to store all the bullion that I had squirreled away at home. It's an expense that I'll just have to live with...but with silver well over $30 the ounce...the dollar value of silver I had just laying around was alarming, so that story raised my paranoia level high enough where I finally made a decision.

This story in Casey's Daily Dispatch may change the way you think about these things as well. It's a must read for sure...and you have to scroll down a bit to get to the story. The link is here.

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Gold's trading volume according to the CME's preliminary numbers shows that around 145,000 contracts net of all roll-over was traded yesterday. Silver's volume net of all roll-over was a bit under 50,000 contracts.

The preliminary open interest numbers in gold for yesterday's trading looks like we'll see a further increase in open interest when the results are posted later this morning. The Tuesday [and Monday] trading days showed that gold o.i. was up a whopping 14,285 contracts. I said it was going to be a big number in yesterday's column...and it certainly was.

Silver is an entirely different story. Wednesday's preliminary open interest numbers indicate that o.i. will show another decline when the final numbers are posted in a few hours. Final open interest numbers for Monday and Tuesday trading showed a huge decline of 5,090 contracts! I'd like to think that JPMorgan et al are buying back short positions...but we won't know that until tomorrow's Commitment of Traders report...and that 5,090 contract decline will be in it.

Since yesterday's CME report, silver's open interest for the March contract has dropped to 39,528 contracts...down 11,320 from yesterday's final report. Without doubt, the o.i. in the March contract will continue to contract rapidly from here. Both Ted Butler and I are hoping that First Day Notice for delivery in the March silver contract will show that 10-15,000 contracts are standing for delivery. IF that does happen, things could get interesting very quickly.

The slight backwardation that existed between the March and May futures contracts in silver disappeared yesterday, as the settle price showed that May was trading at a very slight discount to March...but only 0.6 cents...which is nothing. Since the backwardation exists in every other month, Ted feels that once all the silver roll-overs are done with, then silver will snap back into backwardation in all months just about immediately. I'm not about to disagree with him.

Last week I sent out an offer that EverBank was making about a commodities fund. Here's the pitch again...

Exciting news! EverBank is going to offer a new MarketSafe® CD starting February 17, 2011. It's called MarketSafe® Diversified Commodities...and is available for deposits starting February 17, 2011 – in the afternoon. The funding deadline is March 17, 2011.

The components are: A 5-year term...and it's comprised of 10 commodities – equally weighted: WTI Crude Oil, Gold, Silver, Platinum, Soybeans, Corn, Sugar, Copper, Nickel and Lean Hogs. There will be 5-annual pricing dates...and the minimum to get is $1,500. There are no fees...and it's IRA eligible.

Just as a reminder, this product is 100% principle protected. There is no downside! So, no matter what the commodities do at the end of the term, investors will receive 100% deposited principle protection. Your maximum upside will be the sum of the average returns for years 1-5, based on the Spot Price as of each Pricing Date relative to the Spot Price on the Initial Value Date; subject to a 10% cap and -20% floor for each commodity.

As mentioned above, the funding deadline is March 17, 2011 – this date reflects when your account needs to be opened and deposit received.

So, if you're at all interested...all you have to do is click here for more details.

Gold and silver didn't do much during Far East trading...and now that London is open, gold is up a few dollars...but silver just got smacked pretty hard. The dollar is down about 20 basis points.

Silver is now well into overbought territory...with gold not far behind. With all that's going on in the silver market at the moment...and with only three business days left until First Notice Day in the March silver contract...I expect we'll see another interesting trading day in New York.

See you on Friday.