Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Can The Middle East 'Revolutions' Affect The Gold Price?

Commodities / Gold and Silver 2011 Feb 18, 2011 - 03:37 PM GMT

By: Julian_DW_Phillips

Commodities

Best Financial Markets Analysis ArticleWhen the Tunisian, then the Egyptian revolutions succeeded we were all surprised. Many believed that at last democracy had won in the Middle East. When the King of Jordan changed his government a feeling of contagion set in. Then we heard of riots in Yemen, Libya, Bahrain, Iran and we now look at the entire Middle East as ripe for contagious revolutions.


The question hangs in the air, "Are these revolutions or just exuberant demonstrations?" Will they topple regimes and disrupt oil supplies. We will have to wait and see. None of these stories was expected to affect the oil price let alone the gold and silver prices. But almost imperceptibly the taste has changed. Bahrain's revolution [demonstrations?] gives an uncomfortable twist to the story. Even the riots in Libya, long disliked in the West, could change the global picture of the oil price. But more than this is also possible.

Reflections of History

In the early seventies when the dollar's link to gold was cut, the oil price took off from $8 a barrel to $35 a barrel before settling back. By that time the Arab O.P.E.C. states were in the process of or had nationalized their oil production. They clearly traded their oil pricing [agreeing to continue only in U.S. dollar] against the guarantees of sovereignty by the U.S. Since then the U.S. has protected the Middle Eastern oil producers as far as they have been allowed to. Middle Eastern oil is considered a U.S.' "vital" interest.

  • When the Shah of Persia was ousted by the religious revolutionaries, it came as a shock to the world and in particular the U.S. because this was a force they could not fight - a 'religious democracy'. In terms of the present crisis it is a key to understanding that the Sunnis side of Islam sees government dominating religion and under the Shi'ites it is religion that dominates government, as we have seen in Iran since then.
  • The imposition of democracy in Iraq of late, has resulted in the majority Shi'ites taking power leaving the [30%] minority Sunni side of Islam the underdogs. Yes, it is true that they were so under the Shi'ite Saddam Hussein, but his regime was secular, not religious. Unfortunately, as the neighbor of Iraq and a fully Shi'ite nation, Iran now holds sway over Iraq, as the U.S. withdraws, having established democracy there.
  • Saudi Arabia is 85% Sunni, but in the oil producing region in the east of the country, the population comprises 75% Shi'ites, who have made it clear they want to be treated better.
  • Across from Saudi Arabia and a 16-mile causeway lies Bahrain, where the split is similar to Iraq, with 70% Shi'ites, governed by a 30% Sunni minority topped by a monarchy.

The Stakes are higher!

This is where the stakes change dramatically. Bahrain is the focal point of the U.S. military presence in the Persian Gulf. Bahrain is across the Gulf from Iran. A line drawn across the Gulf straddles the shipping lines that carry the oil from the Gulf. If democratic principles dominated that country, the Shi'ites would become the government and likely abolish the monarchy. Bahrain is an oil producer and would, under a Shi'ite government be in a position to support the Shi'ites in the oil producing region of Saudi Arabia. The fear now is that such a shift to a religious democracy would extend the attitude of Iran to the Bahrain. And yet that is what democratic principles would favor. There would be a huge conflict of interests for the U.S. in Bahrain. If any of this oil came under the government of the Shi'ites world oil prices would shoot up to record levels in quick time. This would then demonstrate just how vulnerable the world would be to the will of the Shi'ite Muslims.

None of this has happened yet and many would say it will not happen at all. The fact that it is a danger may produce remarkable twists to this story in the days ahead. The situation has the potential to rock the global economy, including China's, through unacceptably high oil prices. The uncertainty that is now growing over this possible chain of events may produce very diverse ripples.

  • For instance oil prices sitting over $100 to $145 will kill the developed world's growth and plunge it back into recession or worse.
  • As with Iran, we could expect Shi'ite-ruled countries to treat the U.S. as enemy number one and price their oil and national reserves in currencies other than the U.S. dollar. They would develop China as their main customer. This would hurt the dollar as the globe's sole reserve currency badly. This would add impetus to the shift in the global balance of power.
  • We can expect that the U.S. will do what it can to protect its vital interest there as we saw both in Desert Storm and in Iraq, but how could they 'sell' that to their own nation already tired of war in Iraq and Afghanistan.

It is very difficult to see what will happen next. Most of the developed world will be hoping that the demonstrations in Bahrain will stay at just that. Perhaps large peace offerings to remove prejudicial situation facing the Shi'ites will come next? But the last few years have seen so much structural decay in the monetary world, in the shift of wealth from West to East and in the banking and sovereign debt situation that the future is increasingly difficult to forecast. What is clear is that the 'ripples' from this and other crises will spread far and wide, throughout the global economy and global politics. Will religion be allowed to have such an impact on the world? Perhaps that could be the next new set of confrontations?

How will all this affect the gold and silver markets?

Do not be surprised to see major levels of speculation rise in the oil market in expectation of the worst.

In the past the gold followed by the silver price has only been indirectly influenced by the oil price. The uncertainty that the oil situation posed to the global economy had a direct impact on the two precious metals. The recession and credit-crunch followed, pulling all markets down and causing a 20% + correction in the gold and silver prices. But this time, we would expect to see far less of a reaction in the precious metals should the worst happen. After all, the precious metal markets have continued their uptrend, despite these crises. In fact it is these crises that have prompted more accumulation of the precious metals while other markets have stalled.

This time investors have tasted the bad times before, so will not react as precipitously as they did then. We feel they will turn to precious metals quickly, from other markets. After all, the potential of these situations points to extreme times in which precious metals come into their own.

Gold Forecaster regularly covers all fundamental and Technical aspects of the gold price in the weekly newsletter. To subscribe, please visit www.GoldForecaster.com

By Julian D. W. Phillips
Gold-Authentic Money

Copyright 2011 Authentic Money. All Rights Reserved.
Julian Phillips - was receiving his qualifications to join the London Stock Exchange. He was already deeply immersed in the currency turmoil engulfing world in 1970 and the Institutional Gold Markets, and writing for magazines such as "Accountancy" and the "International Currency Review" He still writes for the ICR.

What is Gold-Authentic Money all about ? Our business is GOLD! Whether it be trends, charts, reports or other factors that have bearing on the price of gold, our aim is to enable you to understand and profit from the Gold Market.

Disclaimer - This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold-Authentic Money / Julian D. W. Phillips, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold-Authentic Money / Julian D. W. Phillips make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold-Authentic Money / Julian D. W. Phillips only and are subject to change without notice.

Julian DW Phillips Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in