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. Since the work has been expanded to include potential solutions to the growing list of seemingly insoluble dilemmas, the working title of the book has been revised to 'REVERSING THE WAY IN!"   MELMAN MINUTE - April 30, 2010 - - - - - Both gold and silver are in the process of making relative highs this morning, providing further encouragement to hard money advocates.  What is also encouraging is that these monetary precious metals continue to push higher regardless of moves in the U.S. Dollar. As we noted Wednesday, when the world's markets shuddered in the wake of the worsening news out of Greece and the subsequent downgrading of government debt in both Greece and Portugal, the U.S. Dollar surged as it became a 'haven' for those fleeing the weakening Euro structure.  However, instead of weakening in the face of a strong Greenback, gold also surged. This morning, we have another facet of the gold and silver rally as in more normal fashion, gold and silver are rallying as the American currency is in modest retreat.  Our belief is that the markets are demonstrating that gold and silver advocates are now turning toward the precious metals for their own merit, not just as a reaction to Greenback weakness. It is also worth noting that both gold and silver have hit relative highs at the same time - one confirming the other - and they are both showing what we regard as one of the most promising technical patterns, one of 'rising bottoms'.  Please note the recent pattern in the gold contract where we see a clear low in early February near $1,045, followed by another low in late March near $1,085, followed by a third low in mid-April near $1,125.  Gold is now clear of all previous chart highs going back to the all-time record just above $1,225 last December and with gold trading above $1,180 this morning, we are rapidly approaching that level. Silver's chart is showing a similar overall pattern including relative lows near $14.80 in early February, followed by $16.50 in late March and $17.50 in mid-April.  Silver has traded up to $18.75 this morning and appears headed to challenge the highest price of this year near $18.95 achieved in mid-January.  It is our belief that the underlying economic situation on this planet is growing worse and appears not only likely to continue in that direction, but could gather strength as the monetary distortions brought about by excessive monetary creation continue to spread.  There appear to be no easy solutions as calls for genuine austerity, presumably designed to appease the media and the public, are forgotten almost as soon as they are uttered.  We believe that as these distortions become extreme, significant quantities of 'scared money' will find their way into the monetary precious metals and, therefore, we continue our long-term bullish stance regarding gold and silver.  We believe base metals plus platinum and palladium will react more in tune with fundamental economic data, rather than monetary considerations. ........................ May 6 is fast approaching and we believe it will be a landmark date regarding the growing world monetary crisis.  For those who have not been paying attention, May 6 is the date for the upcoming British general election.  It is our opinion that the results of that election will go a long way toward demonstrating just how serious is the public regarding 'austerity' measures to control the growing crisis.  And it is growing, as exemplified by an article prepared for publication this morning by financial correspondent Mark Gongloff. According to Gongloff, the risk level associated with British government debt is on the rise and he points to a rapid increase in credit-default swaps, utilized by the financial world to protect against a U.K. government debt default.  He points out that the quantity of these swaps is expanding at the fastest rate among world sovereign debt issuers and he also informs us that this type of increase is eerily similar to the activity which preceded the now-raging Greek debt crisis.  He quotes Tim Backshall, chief strategist at "Credit Derivatives Research" as noting, "...You can definitely infer from this that the markets are growing more concerned about the U.K." With that background, we consider the willingness of the British public to finally reign in explosive government growth relative to taxation revenues to be a vital consideration and, fortunately, this election is providing us with three clearly contrasting policies. Britain's Labour Party, headed by Prime Minister Gordon Brown, is the furthest Left of the three and they have openly expressed the fear that if government were to cut back spending, that would undermine the economy.  Ergo, we believe Labour represents little other than a continuation of "tax and spend" politics. The Conservative Party, led by David Cameron, is striking a "middle-of-the-road" approach, assuring the electorate that the Conservatives would not undermine "essential social programs" such as their National health Service, but would cut into Britain's colossal deficits by cutting government waste and boosting entrepreneurial activity. Currently trailing in the polls are the Liberal Democrats, led by Nick Clegg, but it is the LDs who are offering the only program of even modest austerity, calling for the steepest reductions in government spending of the three. Time is short and we will soon know which of these three parties the British public will have chosen. Speaking of austerity, there was a most interesting story coming out of the IMF regarding the Greek 'rescue'.  Both the International Monetary Fund (IMF) and the European Community (EC) issued a joint statement saying Greece had agreed to an austerity program designed to save approximately 23 billion Euros.  However, as soon as the Greek unions head talk of such an agreement, they vowed to do everything in their power to delay the implementation of such policies. Two questions immediately occur to us.  First, exactly how is Greece supposed to cut out a huge portion of their government and not have that negatively impact their economy?  Second, why do we never receive line-by-line specifics regarding exactly which 'austerity' measures are to be chosen and how much each will save?  Until that type of specific information is provided, we believe such talk is simply fodder for the media. As of 9:15 AM PDT, financial markets this morning have been 'churning' without making decisive moves as America's Dow Industrials have fallen moderately while Canada's TSX Index is up about 70 points, mainly on higher resource quotes.  Precious metals continue to show impressive gains with gold trading at $1,181 and silver at $18.72, both very close to their daily highs.  Base metals are trading quietly, mining share indexes are ahead by a strong two percent on average, crude oil is once again above $86 per barrel and the U.S. Dollar is slightly lower in currency trading. - - - - - All quotes US$ unless otherwise noted. Due to travel to the interior of Mexico early next week, our schedule of "Melman Minutes" will be altered.  On Monday, May 3 we will present a prepared report on the developing environmental crisis associated with the Gulf oil spill.  Since Wednesday will be a travel day, we will resume regular "Melman Minutes" for both Thursday and Friday.          ◄  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.