Why Is Adrian Veidt Digging With a Horseshoe in Watchmen?
Nothing in this show is random. In the very first episode, Mr. Phillips offers Veidt a horseshoe to cut his anniversary cake. At his master's exasperated reaction, he asks if a knife would be more appropriate. In episode four, the horseshoe makes another appearance, as Veidt takes one from Mr. Phillips's corpse and says he "doesn't need it yet."
This seems to imply Veidt has purposefully taught Mr. Phillips to hide a horseshoe inside his cakes, but it doesn't explain why he would do such a thing. Well, if the first episode was a hint of what was to come, perhaps the horseshoe is a knife after all.
It's possible Veidt is not digging at all. Instead, he's sharpening the horseshoe's tip against the ground to later use it as an escape tool (either to kill the Gamekeeper or perhaps cut the bars of his prison cell).