A Melman Minute — January 14, 2008

BULLETIN - Just prior to heading to the airport, we noted the price of gold had reached new record highs at $914 overnight and was trading near $908 at 4:45 AM PST. A lower dollar was the most frequently offered reason, with the Euro moving toward $1.49 U.S.

Dear Readers:

Unfortunately, I will be flying on a mining visit to Nevada early AM Monday, January 14, so this is being prepared without access to current early AM information. Instead, I would like to offer the following.

Just over a year ago, I wrote an essay entitled “Four Dynamic Trends” which has been published in several mining publications and, as well, it has served as the front piece article for this website.

Just to review, the main theme is that the world of precious metals has been benefiting - and will benefit to an immensely greater degree into the future - from four main concepts. These are:

A -

The spread of International Islamic Terrorism

B -

The imminent dangers to the supply/demand equation for the petroleum complex

C -

The diminishment of the power and prestige of America and its growing vulnerability to foreign pressure and blackmail

D -

The growing fundamental demand from billions of new capitalists around the world, particularly in China, India, Brazil and Russia.

Nothing that has occurred during the past twelve months has diminished my faith that these trends continue to be potent right up to this moment, and a fifth one could be added as well, that being an ominous build-up of threats to the very foundations of the world’s international credit systems, particularly as those threats affect the strength of the United States Dollar. Allied to this concept, is the fundamental idea that, to date, every action of the Federal Reserve Board to alleviate the underlying deterioration has, in fact, provided additional fuel to exacerbate the problems down the road.

We are told that the present situation is just a ‘hiccup’ on the road to stability and prosperity. Our opinion is otherwise. We have seen, during the past six months in particular, an array of securities groups all heading simultaneously into the proverbial tank. These include banks, savings and loan association, giant retail establishments, computer manufacturers, auto manufacturers, insurance companies, home builders and credit card issuers. There may be others, but the relevant point appears clear: this is no minor market adjustment. Many of these shares - previously thought ideal for safe and secure accounts - have collapsed by fifty, sixty, seventy, eighty and even ninety percent during the past two years. Hundred of billions in account equity has been wiped out.

At the other extreme, inflation in many commodities has been rising sharply and we have seen unprecedented rallies in Crude oil, corn, wheat, soybeans, gold, platinum, and currencies such as the Swiss Franc and the Euro.

It is said that gold is the counter-measure of the world’s economic stability. If that is the case, the world could be in extreme difficulty and one chart clearly illustrates the point. We are referring to the Exchange Traded Fund (ETF) for gold, which trades under the symbol: GLD on the New York Stock Exchange. It began trading nearly four years ago and has since traced out a virtually perfect comparative picture to the price movements of gold. The chart is self-explanatory and clearly indicates that all trends - short term, intermediate term and long term - are all bullish and there is NO overhead resistance remaining on the chart.

We will have access to our normal market information tomorrow and plan a regular Melman Minute for your consideration.

DISCLAIMER

The information presented above is based on data which we believe to be from reliable sources, but the accuracy of which cannot be guaranteed. Any opinions or predictions contained herein are those of the editor and are likewise offered also for information purposes only.

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