A Melman Minute By: Leonard Melman   August 27, 2008 How quickly these markets can change sentiment!  After dwelling within a structure of deep negativity for weeks, the news background for the base metals has suddenly turned brighter and the important base metals including copper, nickel, lead and zinc have all turned higher with each of them posting sizeable gains this morning. The proximate cause could easily be a surprising report from the U.S. Department of Commerce that Durable Goods Orders for the month of July surged, rising a much-greater-than-expected 1.3%, or an annualized rate of better than 15%.  Economists had been predicting only a minimal improvement, so the figure came as a sharp surprise.  Coupled with reports from China and India that their economic growth is continuing at a relatively robust rate, speculation may be growing that demand for the base metals will be improving over time.  Combined with recent reports that sizeable base metals mining operations have been shutting down due to low prices - thereby reducing new supply entering the market - the fundamentals for base metals could be improving, and the market appears to be reacting to that perception. It is also worth noting that the news background for precious metals has also been improving over the past several days, and much of the credit could go to a gentleman named "Gustav."  For the meteorologically uninitiated, Gustav is a storm presently percolating in the northwestern Caribbean Sea, just to the southwest of the island of Hispaniola where Haiti and the Dominican Republic are located.  It is not so much what Gustav has done to date that is of concern, but it is what professional climatologists are forecasting he will do over the next few days that is raising the level of apprehension. According to the latest advisory just issued at 8:00 AM PDT, Gustav is expected to move back out over the Caribbean, turn west and then curve northeast into the ultra-warm waters of the Gulf of Mexico where it is expected to strengthen significantly, perhaps into a Category Three storm - the same category as Hurricane Katrina - by late Sunday or Monday.  What is also a vital consideration is that it is forecast to hit the Gulf coast in the vicinity of both the City of New Orleans and many of the Gulf of Mexico oil producing areas. One can only imagine the horror - and the tremendous expense to governments - if Gustav slams into New Orleans and undoes much of the repair work since Katrina, and the same concern is growing for the petroleum industry.  As a result, the price of crude has been heading higher for the past few days and is now approaching the (all prices US$) $120 per barrel level this morning.  Both considerations have fueled concern for inflation, driving the U.S. Dollar slightly lower this morning as well, with the net result that gold is once again close to $830 per ounce, up about $5 on the session so far. It is also encouraging to note that the chart of gold is now beginning to take on a more favorable appearance, at least for the short term.  After bottoming near $770 per ounce during the heaviest selling of the recent decline, gold rallied to above $830, then fell back to $806, before the present rally back to the $830 level.  If $806 holds and gold is able to exceed $840, then the beginning of a pattern of "rising bottoms" will have taken place and historically, that type of technical chart action has a bullish connotation. Not surprisingly, both major mining share indexes are ahead this morning with XAU up by over three points and HUI ahead by about six.  Financial markets in both Canada and the USA are advancing as well with America focused on the positive Durable Goods information with the Dow ahead by about 65 points while in Toronto, the TSX is rallying on stronger natural resource quotes and is up by a strong 202 points.   (NOTE:  While we would have liked to add charts to our "Melman Minutes" of the past few days, one of our main support persons has been on vacation, but he is expected to return next week and the charts should resume at that time.) One last thought.  As long-term readers know, one of our greatest fears for the future profitability of the mining industry is the ever-escalating parade of new laws and regulations which have been creating expenses, complications and delays for mining projects.  Unfortunately, we keep receiving indications that the parade of such interferences is unlikely to subside. However, from time to time, the industry does score at least a temporary victory and one such event just took place in Alaska.  Financed by an ultra-wealthy Alaskan named Bob Gillam - who happens to own a hunting and fishing lodge in the area - a ballot measure was placed before Alaska voters which would have sharply restricted mining development, particularly including the immense Pebble Project under development by Vancouver-based Northern Dynasty Minerals, if it could be proved that the area included salmon spawning streams.  Opposition to the ballot measure was led by the Alaska Mining Association and we just spoke with their Executive Director, Steve Borell (sp?).  He informed TMR that the measure went down to defeat by a count of 57.17% 'no' votes as opposed to 43.83% in favor.  He noted that the Pebble Project is indeed truly enormous, estimated to contain the second largest reserves of copper and gold on earth, plus enormous molybdenum values as well. Undoubtedly, measures of this type will be promoted again and the industry must always be on the alert for them.  However, at least for the time being, we are able to celebrate a victory over the anti-mining forces out there.   ◄  Previous Minute                                                                                                         Next Minute  ►
		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. Any investment decisions should be made only following consultation with registered investment professionals.