Bullion banks get Financial Times help in trying to talk silver down.

The gold price was pretty choppy...and carved out a bit of a low around the London a.m. gold fix at 10:30 a.m. in London. From there, it rallied to its high of the day at $1,369.90 spot, which was around 8:45 a.m. in New York trading. And it was, as they say, mostly downhill from there...with the low [$1,353.30 spot] coming at 12:50 a.m. Eastern. It didn't gain much of that decline back before the close of electronic trading at 5:15 p.m. in New York.

The scale of Kitco's gold chart makes the action look worse than it really was, but it's quite obvious to me that the bullion banks were lurking about during the Comex session in New York.

Silver was pretty stubborn yesterday...and traded in a twenty cent range virtually all day Friday. But once London closed for the weekend at 4:00 p.m. GMT...11:00 a.m. in New York, the price got hit hard...and it, too, succumbed to the bullion banks' wishes. The New York high [$30.33 spot] came at 8:35 a.m...and the N.Y. low [$29.71 spot] occurred at 12:55 p.m. Eastern. The subsequent price rally that began after the low, stopped the moment that floor trading ended at 1:30 p.m...as the buyer vanished.

Here's the 10-minute silver chart for Friday courtesy of reader Steve C. You can see the big 3,300 contract spike in volume at the London close, as it stands out like the proverbial sore thumb.

The world's reserve currency opened around 78.20 at the beginning of Far East trading on Friday morning...and then rallied about 45 basis points. That rally came to an end at 11:00 a.m. in London...and then declined to its New York low price at precisely 11:00 a.m. Eastern...the close of the London gold market. That was also the exact time when the silver price [and gold as well, if you check closely] got hit by an avalanche of selling, as the dollar spiked higher. Coincidence? Not likely.

Until the 11:00 a.m. smack-down in both gold and silver...the gold stocks were well into positive territory. But precisely at 11:00 a.m. at the London close...and the dollar's low tick...the stocks got sold down...then basically traded sideways for the rest of the New York session. The HUI closed down 0.56%.

Here's the 5-day HUI to give you an overview for the week that was.

The CME's Daily Delivery report showed that 160 gold and 2 silver contracts were posted for delivery on Tuesday. The issuers and stoppers in gold were all the 'usual suspects'...and the link to the action is here.

There was no activity reported in either the GLD or SLV ETFs yesterday.

The U.S. Mint had another sales report. This time they reported selling another 12,500 ounces of gold eagles...along with another 49,500 silver eagles. Month-to-date the mint has sold 39,000 ounces of gold eagles and 986,500 silver eagles.

The draw-downs continue from the silver stocks over at the Comex-approved warehouses. On Thursday they reported receiving only 2,154 ounces...and shipped 425,230 ounces of silver out the door. The link to that action is here.

As silver analyst Ted Butler said on the phone yesterday...Friday's Commitment of Traders report was a "good news/bad news" kind of story. The good news being that the '4 or less' bullion banks did not increase their short positions in either silver or gold for the reporting period. The bad news was that the 'raptors'...as Ted calls them...liquidated a huge portion of their long positions and took profits from the recent run-up in price.

As Ted has mentioned before, whenever the Raptors take profits by selling long positions, it has the effect of increasing the Commercial short position because that's the category these traders are located in. This is also the category that the '4 or less' bullion banks hide out...but they were not a factor in the week that was. It was mostly the smaller traders that weren't in the '8 or less' category.

In silver, the Commercial net short position increased a huge 6,316 contracts, or 31.6 million ounces of the stuff. In gold, the Commercial net short position increased a very chunky 16,714 contracts, or 1.67 million ounces of gold.

The good news is, that since these Raptors have taken their profits by selling out the bulk of their long positions, they won't be there to sell into the next rally, as they are effectively out of the market on the long side...although they do have small residual long positions left that will be sold at a later date. But that shouldn't affect the prices of either metal by much when it does happen.

Here's Ted's "Day of Production to Cover" graph that's courtesy of Nick Laird over at sharelynx.com.

¤ Critical Reads

USPS warns of default as losses mount

My first two stories today are courtesy of reader Scott Pluschau. The first is posted over at money.cnn.com...and bears the headline "USPS warns of default as losses mount". The U.S. Postal Service warned Wednesday that it may default on some of its financial obligations later this year after reporting yet another quarterly loss. The link is here.

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January deficit grows by $50B, on pace for $1.5 trillion

Scott's second offering is an AP story that was posted over at finance.yahoo.com...and is headlined "January deficit grows by $50B, on pace for $1.5 trillion". The federal government's budget deficit grew by $50 billion in January and is expected to finish the year as the highest in history. The link to the story is here.

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Sysco profit falls as 'extreme' meat, dairy inflation raises costs

Reader Bill Moomau provides our next reading material from the rather obscure website foodsystemsinsider.com. The headline reads "Sysco profit falls as 'extreme' meat, dairy inflation raises costs". Sysco Corp. reported a lower-than-expected quarterly profit, with the largest U.S. foodservice company saying “extreme” inflation in meat, seafood and dairy products increased its costs and curbed customers’ purchasing budgets. This rather short story is worth your time, as it shows the always insidious creep of inflation into the nations food-pricing system. The link is here.

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States with the Highest Foreclosure Rates

The next story today is from reader Roy Stephens...and is posted over at cnbc.com. The headline reads "States with the Highest Foreclosure Rates". It's a photographic journey through the top 12 U.S. states with the highest foreclosure rates. Foreclosure filings—defined as a default notice, auction sale notice or bank repossessions—were up 1 percent in January from the previous month and down 17 percent from January 2010. One in every 497 housing units received a foreclosure filing during the month, according to Realty Trac's January 2011 Foreclosure Market Report. I thought it was very interesting...and the link is here.

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Bernanke’s 2009 Interview Withheld by Crisis Panel

Washington state reader S.A. sent me the following Bloomberg story yesterday evening. I sent it to Chris Powell...and it's now a GATA release. The headline is astonishing and reads "Bernanke’s 2009 Interview Withheld by Crisis Panel". The Financial Crisis Inquiry Commission, created by Congress to investigate and report on the causes of the market meltdown late last decade, won’t publicly release its full 2009 interview with Federal Reserve Chairman Ben Bernanke, a commission spokesman said. More Fed secrets, dear reader...and the link is here.

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Exclusive: Interview With Eric Sprott

Washington state reader S.A. has another story today...and this one's posted over at zerohedge.com. The headline reads "Exclusive: Interview With Eric Sprott". I know Eric a little bit...and I always like to pay attention to those people whose net worth has nine zeros after the first number. I think you should as well...and the link is here.

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Mubarak Leaves Legacy of Egypt in Turmoil While Region at Peace

I see that Egyptian President Hosni Mubarak is history. Mubarak was brought down by an unexpected coalition of opposition politicians, members of the banned Muslim Brotherhood group and, most important, tens of thousands of young people who planned and organized the demonstrations on Facebook and Twitter. It will be interesting to watch to see what happens to Egypt now. Here's the Bloomberg story on that...and it's headlined "Mubarak Leaves Legacy of Egypt in Turmoil While Region at Peace". One has to wonder how long 'peace' will last in the other Arab states from this point onward...and the link to the story is here.

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European debt crisis threatens Portugal

Next is a story that I 'borrowed' from Friday's King Report. It's a piece from the Thursday edition of The Guardian in London that's headlined "European debt crisis threatens Portugal". Portugal becomes the latest eurozone member to be threatened by speculative attacks in the bond markets as borrowing costs soar. The European Central Bank stepped into the financial markets to buy Portuguese bonds on Thursday amid growing fears that the eurozone's rolling crisis is about to claim it's third victim...and the link is here. It's only a matter of time before this crisis hits Spain and Belgium as well.

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In New California Gold Rush, Old Mines Reopen

Reader Phil Barlett provides my first gold-related story today. This one is from yesterday's edition of The New York Times...and bears the headline "In New California Gold Rush, Old Mines Reopen". It's very much worth the read...and the link is here.

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Bullion banks get FT's help in trying to talk silver down

The next two stories are both GATA releases...and both are from the Financial Timesout of London. Chris Powell has headlined the first story "Bullion banks get FT's help in trying to talk silver down". Bankers said at least five miners had hedged a portion of their silver output in recent months, either by selling future production ahead of time at a fixed price or by buying options to protect against falling prices. This has helped push the market into "backwardation" -- an unusual condition for silver in which the price for future delivery is lower than for immediate delivery. The companies weren't named...and I'd sure like to know who they are, because if I own any stock in them, I'll strongly consider selling them. This story is definitely worth the read...and the link to the GATA release is here.

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Possible shift from paper gold to physical gold, sneaks into bottom of FT story

The second FT/GATA release is this story that Chris has headlined "Possible shift from paper gold to physical gold, sneaks into bottom of FT story". The FT headline reads "Gold ETF Outflows and Shifts in Investor Sentiment". This story is also very much worth your time...and the link is here.

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John Embry Interview

Eric King of King World News fame slid the following John Embry Interviewinto my in-box in the wee hours of this morning. As most of you know, John is Chief Investment Strategist at Sprott Asset Management in Toronto. I just received the interview now...and stuck it in this spot. I've had no time to listen to what John has to say...but it's a good bet that it's a must listen...and the link is here.

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All Currencies Have Fallen Against Gold in Decade

Washington state reader S.A. has provided this very nifty Casey Research graph showing how the world's major fiat currencies have been devalued against gold over the last ten years. The chart is titled "All Currencies Have Fallen Against Gold in Decade".

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Phoenix Resource Investment Conference and Silver Summit

If you've got nothing better to do next weekend, you can take in the Phoenix Resource Investment Conference and Silver Summit next Friday and Saturday...February 18th and 19th. The GATA gang...along with silver analyst Ted Butler...plus many others, will be in attendance. The skinny on all this can be found in this GATA release linked here.

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Escaping the Great Depression - and Extending the Greater depression

Lastly today, is this commentary by Casey Research's Grand Poobah, Doug Casey. As reader Peter Handley said in an e-mail to me yesterday afternoon..."Readers who do not follow Casey Research may find this a worthwhile read." I agree entirely. And even if you follow Doug's musings on a regular basis, this article is well worth a second look. The headline reads "Escaping the Great Depression - and Extending the Greater depression". It's your big read of the day, so top up your coffee, then click here.

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Today's 'blast from the past' was composed by Sergei Rachmaninoff in 1901. It's his Prelude in G minor, Op.23, No.5...and he performed it in public for the first time in Moscow on February 10, 1903. Here is the electrifying performance of this piece by Ukrainian-born pianist Valentina Lisitsa when she played it as her third encore at a concert in Seoul, South Korea a number of years back. She is good...so turn up your speakers and then click here. Enjoy!

After watching the bullion banks do the dirty in New York yesterday, I'm still wondering what they're really up to at the moment. I know that covering their short positions is at the very top of the '4 or less' traders 'To Do' list...but they are certainly going about in what I consider to be strange fashion. This entire week's trading activity sort of fits into that pattern of marking time...but for what reason? We'll see if they have some sort of grand plan...or are they just making it up as they go along at this stage?

Volume in gold yesterday was pretty decent...at least compared to prior days this week. The CME reported that around 130,000 contracts net of all roll-overs was traded on Friday. The preliminary open interest number indicates that gold's o.i. will decline when the final numbers are posted late Monday morning Eastern time.

Silver's volume was around 61,000 contracts net...and I'm not impressed one iota by the preliminary open interest number that was posted, as we may have an increase in o.i. when all is said and done on Monday morning.

Final open interest numbers for Thursday's trading day showed a smallish 572 contract increase in gold's o.i...and an eye-watering 4,835 contract increase in open interest in silver.

I didn't see a thing in silver's trading activity on Thursday [the red trace in the silver chart at the top of this column] to indicate why there would be any increase at all. Ted speculated that it must have been a spread trade that was put on. That seems like the most logical explanation...but we won't find out for sure until next Friday's Commitment of Traders report.

While I'm on the subject of silver, I want to briefly discuss the silver backwardation issue...where the front month [March] is selling at a premium to the May contract...and beyond. When I was looking at the silver futures trading on Friday, I didn't see any premium at all between March and May. As a matter of fact, the May contract was selling for about 2.5 cents more than the March contract, which is not backwardation at all.

To find silver selling at a discount to the March silver contract, I think I had to go out to the September 2012 contract to find any sign of backwardation...and even then it was only a penny cheaper than the March contract.

There's no question that we are on the cusp of backwardation...but we have not arrived at that point just yet...but we are very close. And it deserves watching every day from hereon in.

To give you an idea how tight and how close we are to real backwardation. March silver is quoted at $29.995 the ounce. If you go out to December 2015...silver is quoted at $29.875 the ounce. That is true backwardation...but who would want to sell silver in March hoping to get it back in December 2015 and save themselves 12 cents the ounce? Nobody, that's who.

Here's the silver futures page from the CME. If you check 'Prior Settle' price column, you can see for yourself just how tight this market really is going all the way out to December 2015. Compare all the prices to the March contract, which is the front month for silver. It's in contango all the way out until September 2012...before slipping into backwardation. The link is here.

There was mention in one of the Financial Times stories earlier on that five different silver miners had sold forward production...and that had exacerbated this backwardation issue. I don't know how much truth there is in that, but when I find out, you'll be the first to know.

Both Ted and I get the impression, based on what's been happening in the silver market since the beginning of the year, that this is the last gasp of the silver price-fixing scheme. The activity in the futures market is unprecedented. Something's up...but when it will happen, or what form it will take, is not yet known by anyone.

Every time I purchase physical silver, I always wonder if that is the last time that I'll be able to buy it on the cheap. I don't know when all this is going to end, but when it does, I don't want to look back with regret that I didn't buy every ounce that I could right up until the bitter end. So, I'm going to stay 'all in' until the silver market hatches into something....and it just might do that...and soon.

There's still time to either readjust your portfolio...or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and I respectfully suggest that you take a trial subscription to either Casey Research's International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers], with all our best [and current] recommendations...as well as the archives. A subscription to the International Speculator also includes a free subscription to BIG GOLD as well. And don't forget that our 90-day guarantee of satisfaction is in effect for both publications.

Enjoy the rest of your weekend...and I'll see you here on Tuesday.