SPECIAL ALERT! Gold Higher on Wars and Rumors of War!
Our Recommendation!
For now, it appears that the market is taking a breather in the matter of the US vs. Iran. As we wrote yesterday, we are waiting for the next shoe to drop.
President Trump says Iran is “standing down.” Perhaps. But Iran is saying something different.
Iran’s Supreme Leader Ayatollah Ali Khamenei says that yesterday’s missile attacks on two US bases in Iraq amount to a mere slap in Uncle Sam’s face and are not nearly enough.
Khamenei tweeted, “The corruptive presence of the US in the region of West Asia must be stopped.” The region “won’t accept the US presence,” says Khamenei. “The US has caused war, division, sedition, destruction, and the demolition of infrastructures in this region. Of course, they do this everywhere in the world.”
So at this point, the most important question is what happens next between Iran and the US.
We have cited the centrality of the confrontation between the US and Iran as a major key to the Middle East, an issue that will realign geopolitical bedfellows everywhere and diminish the US dollar’s global status, and as a powerful dynamic that will drive the gold price much higher.
As we have repeatedly warned, this process is underway now. We suggest that you review our commentaries on Iran, including Watch This One Carefully, (12/4/18), and Temperature Rising in the Persian Gulf, (4/22/19).
We sometimes marvel at the people the news networks put in a guest chair and expect us to listen to. Instead of listening to 2o-something “political consultants” and armchair warriors, we prefer to let someone of more wisdom and experience read the tea leaves. Someone with an informed view of not just tomorrow’s consequences, but the longer-term trajectory.
Colonel Douglas McGregor is storied for his military career, geopolitical knowledge, and his outspokenness. He appeared on Fox News Tuesday evening. “At this point,” said McGregor, getting to the heart of the matter, “certainly we could go to war with Iran. Iran would suffer. The Russians would undoubtedly join the fray at some point. The Chinese, with inexhaustible piles of cash, will finance the Russians, and ultimately go to work to help the Iranians.”
“Europeans will look at this as if we’ve lost our minds and they are probably right. The Japanese, the Koreans will stay out of it, refuse to have anything to do with it. And when the rest of the Middle East starts to be destroyed under hails of missiles, I imagine that our alleged strategic partners in the Arabian Peninsula will back away.”
McGregor’s conclusion: “Remember that when you destroy Iran, you are essentially opening the floodgates to Mr. Erdogan in Turkey and the Sunni Islamists that we have been fighting. If you like ISIS, destroy Iran and you will get ISIS times 100.”
Every outcome McGregor has postulated – every one – also means irreversible damage to the US dollar and much higher gold prices.
At the risk of overdoing our criticism in this post, we must say that the mainstream media’s ability to see more than one thing at a time is very limited. In an October post, Global Tensions, (10/20/19), we reported on the little-noted but renewed US military buildup Saudi Arabia. “11,000 troops were sent to Saudi Arabia, a purported ally, in May. Now another 3,000 have been added, along with two new fighter jet squadrons. The most recent addition to US forces there also includes two Patriot anti-missile batteries and one high altitude area defense system. US forces in Saudi Arabia have long been a powder-keg issue in the Islamic world.”
Meanwhile, few know that just days ago Iran, Russia, and China staged joint naval exercises in the Gulf of Oman. It doesn’t much look like the actions of countries that intend to let the US exercise heremony in the region forever. Rather, it is a not-too-subtle challenge.
Nor to be overlooked is Turkey’s deployment of troops to Libya; Turkey is providing arms to factions that, in turn, fly MiG’s from Russia. And while there is much more to point out on the geopolitical scene – for example, Indonesia and China are now in a confrontation in the South China Sea – we will leave that for another day so that we still have room to point briefly to extraordinary monetary shenanigans by the Federal Reserve.
The Fed is engaged in a frenzy of “money printing.” Just this week ZeroHedge reported that the Fed had provided $99 billion in new liquidity to the repo markets. We will write more about this and the Fed’s reckless new Quantitative Easing in the days to come. In the meantime, read our post What is the Fed So Afraid Of, (12/13/19), and our briefings on the topic from November, Inflate of Die, Part I and Inflate or Die, Part II.
Gold will spike in an instant in the event another shoe drops in the US-Iran face-off. For now, gold has pulled back from its high of over $1600 reached on Monday, 12/6, following the assassination of Iranian General Soleimani. Today gold closed at $1557.24.
We recommend our friends and clients take advantage of the pullback to add to their gold and silver positions.