A Melman Minute By: Leonard Melman   NOTE: In order to complete Mr. Melman's forthcoming book on the essential fundamentals of the developing international financial crisis and its relationship to gold and silver, new "Melman Minutes" will be posted only three times per week, each Monday, Wednesday and Friday. The working title of the book will be 'Just a Melman Minute!"   November 4, 2009   A truly historic event occurred in the world of gold over the past couple of days, but much of the world apparently has failed to recognize its significance.  We are referring to the Indian government's purchase of approximately six million ounces (200 tonnes) of gold from the International Monetary Fund (IMF), thereby accepting virtually one-half of the recently-announced planned sale by that organization. What strikes us as the most important and meaningful interpretation of this event is that the Indian nation, home to one of the world's few truly-expanding economies, has made a statement that it trusts more in gold than the U.S. Dollar, since it is willing to exchange the latter for the former.  It is truly a powerful and public vote of non-confidence in the Greenback and the price of gold has reacted to this move with genuine power. Just prior to the announcement, gold had fallen from near $1,070 to spot $1,030, but by the close of trading Monday, it had soared to the mid 1050s - but that was nothing compared to the trading the next day, Tuesday.  Yesterday gold skyrocketed another $30 to the highest level in recorded history, near $1,085 and has continued to rise this morning, now standing close to the $1,100 per ounce threshold. We can also note that observers believe that China was ready to purchase the entire 403.3 tonne offering had it not been for India's early actions and strong speculation exists that they China will buy up the remainder of the auction by themselves.  The is even further guessing that the action by India and the speculation by China leads to the conclusion that other Central Banks, particularly those in Southeast Asia, will also be moving away from the U.S. Dollar and toward gold. While we generally don't like to publish the same chart over again, we believe this move in gold carries truly important ramifications, not the least of which is technical in nature. Please note that in early September, early October and now, in early November, the chart of gold has opened up a gap as it broke out to new highs.  Not surprisingly, chart textbooks - such as our favorite, "Technical Analysis of Stock Trends" by McGee and Edwards - refer to such moves as "breakaway gaps."  The authors make these three points about such gaps: 1 - False moves are seldom attended by gaps. 2 - Buying demand is stronger than would be suggested by a gap-less breakout. 3 - A gap-accompanied move, when compared to a gap-less one, carries the suggestion that, "...it may be inferred that the ensuing move will carry farther or faster, or both." This textbook on charting has survived through more than a dozen re-printings over a 61 year period.  In our opinion, that suggests that readers have found it to be of value through the decades.    .................... One of our favorite 'sports' is to have fun with numbers, particularly when those numbers tell us an important story, frequently one which is totally ignored by the general and investing public.  Today's numbers relate to employment. As of November 1, 2009, America's population was estimated at close to 308,000,000 and, according to October's Department of Labor figures, approximately 154,000,000 people held non-farm jobs - or about 50%.  According to census data, it is estimated that the United States population is expanding by about 3,000,000 people per year, so, we can calculate that the number of non-farm, non-governmental job holders should expand by about 1.5 million per year just to keep pace with population growth! With that in mind, please consider the just-released Automatic Data processing (ADP) Employment Report for the month of October.  According to that private firm's projections, America's economy lost yet another 203,000 jobs last month with the manufacturing and service sectors being particularly hard hit. Simply put, this report - if accurate - shows that the employment economy is still contracting, despite strong assurances from an array of government and industry leaders that powerful underlying improvement has been taking place since this past March. Someone is not being candid, and it is a matter of the utmost importance in our projections.  If the economy is still contracting, and matters are still difficult at best, then we can project an ongoing array of stimulus programs into the future at the cost of massive deficits accompanied by monumental fiat money creation.  And, going full circle, numbers of that sort would weaken the Greenback's reputation internationally and might indeed be an important part of the puzzle regarding why India and China are looking on IMF auctions as an opportunity to accumulate the yellow metal. Yet another indication that all may not be proceeding as favorably as the optimists would suggest came from the world of American politics yesterday.  The Democratic Party under the leadership of President Obama received most unwelcome news from two special elections last night.  One of America's most pivotal political battlegrounds has been the State of Virginia.  After a run of 40 years with majorities for Republican presidential candidates, Virginia voted strongly in favor of President Obama last year.  Democrats were looking forward, undoubtedly, to lasting strength in that important state, but those hopes were handed a powerful setback when Republican candidate Bob McDonnell re-captured the governorship for the Republican Party after eight years of Democratic rule.   What made the result particularly noteworthy was the most important theme of McDonnell's campaign was criticism of Obama's policies and actions - and he won by a wide margin. New Jersey voters also handed the Democrats a major setback when Democratic Governor Jon Corzine was ousted by Republican candidate Chris Christie.  Our interpretation of these results is that discontent regarding massive government intrusions is mounting in America.  This trend, should it grow significantly, could lead to a major reduction of Democratic strength in the 2010 off-year elections. ............................. Financial markets this morning looked at these results and appeared quite willing to shrug them off as both the Dow Industrials and Canada's TSX are moving sharply higher with each index ahead by about 125 points as of 9:00 AM PST.  Precious metals are also stronger with gold reaching a new high level of $1,096 while silver has gained more than 20 cents on the session.  All base metals are on the plus side with lead and zinc showing particular strength while both major mining share Indexes are moderately higher as well.  Crude Oil is once again above the $80 per barrel mark and the U.S. Dollar (DX) Index has fallen to below the 76 level. (All quotes US$ unless otherwise noted.) Next Melman Minute scheduled for Friday, November 6, 2009. ◄  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.