Gold’s close at $1350 on Tuesday, 6/18 was the highest close in over a year. Last week gold reached an intraday high of $1362.
With that, gold is more than $50 an ounce over its 50-day moving average; it is more than $80 an ounce over its 200-day m0ving average.
So, what exactly is going on with gold?
Just exactly what we have been writing about for months. In fact, the forces driving gold are so plentiful that we hardly know where to begin.
But let us touch on a couple of things.
Things are moving fast in the Persian Gulf. According to the Jerusalem Post, diplomatic sources at the UN describe the US as readying a massive aerial bombardment campaign against Iranian targets.
Secretary of State Mike Pompeo visited Centcom Headquarters in Florida, while both John Bolton and Henry Kissinger have been sighted at the Pentagon. All this as the Trump administration announced plans to send 1,000 more troops to the Mideast.
Meanwhile, China has sounded a grave warning about the US opening a “Pandora’s box” in the region and called on the US to halt its “extreme pressure” campaign against Iran.
At the same time, Russia, describing what it called a “conscious attempt to provoke a war with Iran,” has called on the US to halt its “unthinking and reckless pumping up of tensions in an explosive region.”
We don’t know exactly what will happen next. Things can heat up and cool down, only to ignite again when least expected.
Still, there are other fronts that threaten military confrontations, like the South China Sea. We always try to bear in mind that when the world is focused on one trouble spot, real conflagrations often break out somewhere off the news media’s radar screen. The US has just enough military presence scattered across the globe that any incident anywhere can act as a tripwire to assure US involvement.
At the same time, US debt continues to explode. But foreigners, many of whom are skeptical of US attribution of responsibility to Iran for tanker attacks in the Persian Gulf region, are also dragging their feet when it comes to continuing funding US debt.
China, the largest foreign creditor of the US, sold $17 billion of US debt in March and April, a total of $69 billion over the twelve months that ended in April.
Other countries are picking up part of the shortfall, but they won’t be able to continue to do so in the face of the advancing global trade war and the coming currency war. (It should be lost on no one that both Trump and Democratic opponents like Elizabeth Warren want to drive the purchasing power of the dollar down. That means Americans will get less, not more for their money.) Nor can foreign creditors be counted to keep up with the rivers of US red ink. During the same 12-month period ending in April, US debt soared by almost a trillion dollars.
That’s probably enough to chew on for now. We will leave for another day revisiting other dynamics that will propel gold to unimaginable new heights.
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