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Geopolitical Risk in Middle East and China Currency and Trade War Risk Supporting Gold

Tyler Durden's picture




 

Submitted by GoldCore

Geopolitical Risk in Middle East and China Currency and Trade War Risk Supporting Gold

Gold is trading at USD 1,684.20, EUR 1,221.90, GBP 1,068.81, JPY 129,103.00, AUD 1,663.34 and CHF 1,509.80 per ounce.

Gold’s London AM fix this morning was USD 1,687.00, GBP 1,070.36 and EUR 1,222.02 per ounce.

Yesterday’s AM fix was USD 1,662.00, GBP 1,064.09 and EUR 1,222.96 per ounce.

Cross Currency Table

Gold has traded in a range between $1,580/oz and $1,680/oz for two weeks. Gold has broken out above the upper end of the  range and resistance at $1,680/oz this morning. A close above $1,680/oz and rise to over $1,700/oz could result in gold quickly rising back to $1,800/oz.

Gold in US Dollars – 30 Day (Tick)

Support is at $1,600/oz, $1,580/oz and below that strong support is seen at the lows reached on September 26th of $1,532.70/oz.

Market participants are divided as to whether this is consolidation prior to a resumption of the bull market, whether a further sell off takes place or whether a bear market has commenced.

Strong physical demand being seen internationally, but especially in Asia, would suggest that gold may have bottomed and the bull market is set to continue in the traditionally strong autumn and winter months.

The fundamental factors that have driven the gold market in recent years - macroeconomic, monetary, systemic and geopolitical risk – also suggest gold’s bull market is set to continue.

Geopolitical risk is seen in the bizarre alleged plot by the Iranian revolutionary guard to use a purported Mexican drug dealer to assassinate Saudi Arabia's ambassador to the United States.

The Obama administration plans to leverage the incident into a new global campaign to further isolate the Islamic republic and maintain US dominance over the strategically vital region.

Gold in Euros  – 30 Day (Tick)

The Middle East is already a tinder box on the brink of conflict over Iran's nuclear programme, with Israel increasingly twitchy over the progress Tehran is making towards an alleged capacity to make nuclear weapons.

A small spark such as this alleged plot and the reaction of the US, Iranian, Saudi and Israeli governments could result in military conflict in the region. Also, there are simmering geopolitical tensions between the US and the increasingly powerful Russia and China about the Middle East.

A military conflict would see oil and gold prices rise sharply due to supply concerns and safe haven demand respectively.

Geopolitical risk and the geopolitical instability in North Africa and the Middle East was one of the factors that led to gold’s rise in recent months and it is likely to remain an important driver of prices in the coming months.

Monetary risk remains and the Slovakian vote is another reminder of the real risk posed to the Eurozone and the euro through contagion.

Currency and macroeconomic risk is also seen in the Chinese warning to the US overnight that the US currency law risks a trade war and a 1930’s style Depression.

Gold in Chinese Yuan  – 30 Day (Tick)

Systemic risk remains heightened and Trichet acknowledged that yesterday with his warning that the crisis is ‘systemic’ and his warning that the high interconnectedness in the EU financial system has led to a rapidly rising risk of ‘significant contagion’.

European banks are on the verge of collapse and global debt markets risk a critical meltdown.
Finally, these risks are contributing to elevated macroeconomic risk and the significant risk of severe recessions in all major economies and the risk of a new Great Depression.

Gold remains an essential diversification that will protect from the real risks facing investors and savers today.

Those negative on gold and calling gold a bubble continue to focus almost exclusively on price.

A more enlightened approach for those genuinely concerned about people’s financial welfares would be to advocate a diversification into the safe haven asset and currency that is gold in order to protect against these real risks. 

For the latest news and commentary on financial markets and gold please follow us on Twitter

NEWS

(Reuters) -- Gold climbs as dollar weakens; Slovak vote supports
http://www.reuters.com/article/2011/10/12/us-markets-precious-idUSTRE78M...

(Business Week) -- Gold Climbs on Renewed Europe Debt Concern After Slovakia Vote‎
http://www.businessweek.com/news/2011-10-12/gold-climbs-on-renewed-europ...

(Mineweb) -- ECB gold reserves fall by 181m euros during week ending Oct 7th.
http://www.mineweb.com/mineweb/view/mineweb/en/page504?oid=137291&sn=Det...

(The Financial Times) -- US accuses Iran of Saudi envoy death plot
http://www.ft.com/intl/cms/s/0/185fa35c-f439-11e0-bdea-00144feab49a.html

(FT Alphaville) -- China warns US currency law risks 1930's style Depression
http://ftalphaville.ft.com/thecut/2011/10/11/699571/

COMMENTARY

(China Briefing) -- China’s Pan Asia Gold Exchange: A New Playing Field for Speculators?
http://www.china-briefing.com/news/2011/10/11/chinas-pan-asia-gold-excha...

(GoldSeek) -- Gold price suppression purposes and proofs
http://news.goldseek.com/GATA/1318362560.php

(Mineweb) -- Politicians, Financial Regulators, Banking Officials and Gold
http://www.mineweb.com/mineweb/view/mineweb/en/page103855?oid=137241&sn=...

(24h Gold) – Kunstler: Occupy Everything
http://www.24hgold.com/english/news-gold-silver-occupy-everything.aspx?c...

(Guardian) – Prately: Does the EFSF have a design fault?
http://www.guardian.co.uk/business/nils-pratley-on-finance/2011/oct/11/d...

 

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Wed, 10/12/2011 - 07:02 | 1764841 Belarus
Belarus's picture

It's far more simple: gold is being supported and bid in here because every single country has decided to print untold sums of confetti paper to push against the montrous collapse of debts. The only sound money is Gold. Period. It will once again lead allmarkets higher with alpha to boot. Silver will alpha-beta Gold. 

Wed, 10/12/2011 - 07:22 | 1764877 markmotive
markmotive's picture

The gold bull market isn't over as long as real interest rates remain negative.

http://seekingalpha.com/article/289717-identifying-the-end-of-the-gold-bull

Wed, 10/12/2011 - 08:18 | 1765004 Pinto Currency
Pinto Currency's picture

 

 

Belarus,

 

Right on.  Results of 15 years of central banks blowing a money / debt bubble is now collapsing on us and inflation is accelerating.

 

This Iran stuff is laughable. But it doesn't mean NATO won't attack Iran and blame it as our currencies collapse.  Much like blaming 1970s inflation on OPEC and the Anchovy fishery failure after printing money for a decade for the Vietnam War and LBJ's policies: 

 

http://en.wikipedia.org/wiki/Stagflation

Explaining the 1970s stagflation Further information: Nixon Shock

Following Richard Nixon's imposition of wage and price controls on August 15, 1971, an initial wave of cost-push shocks in commodities was blamed for causing spiraling prices. Perhaps the most notorious factor cited at that time was the failure of the Peruvian anchovy fishery in 1972, a major source of livestock feed.[16] The second major shock was the 1973 oil crisis, when the Organization of Petroleum Exporting Countries (OPEC) constrained the worldwide supply of oil.[17] Both events, combined with the overall energy shortage that characterized the 1970s, resulted in actual or relative scarcity of raw materials. The price controls resulted in shortages at the point of purchase, causing, for example, queues of consumers at fueling stations and increased production costs for industry.[18]

Wed, 10/12/2011 - 10:19 | 1765501 Bananamerican
Bananamerican's picture

yup. war spending.

Throughout history....war spending.

What knocked the europeans (& the us) off the gold standard in the 20th century?

war spending.

Alongside Congress "cake & eat it too" mentality and Wall Street's men of Moloch running amok, what do we see?

TEN YEARS of war spending..."I love the smell of graft in the morning...It smells like, stalemate"

Wed, 10/12/2011 - 09:26 | 1765174 tarsubil
tarsubil's picture

Given the example of the suisse franc, how can anyone deny this? People want money that is a legitimate store of value. The best option of the few remaining is gold then silver.

That doesn't even begin to touch on the real fact that money printing is the state robbing the people and buying gold and silver is the best way to give the state the bird.

Wed, 10/12/2011 - 07:07 | 1764846 falak pema
falak pema's picture

wow,  the smell of war and protectionism are the teats on which feed the gold bugs!

Wed, 10/12/2011 - 07:15 | 1764858 daily bread
daily bread's picture

That's a real mixed metaphor .. bugs aren't mammals and wouldn't be interested in teats.

I think gold bugs are more derived from dung beetles .. they feed on the stinking waste of the fiat system.

Wed, 10/12/2011 - 07:31 | 1764900 falak pema
falak pema's picture

'gold bugs' referred to the human species not to the true buggies. But thanks for your post!

Wed, 10/12/2011 - 09:25 | 1765172 Abitdodgie
Abitdodgie's picture

But humans behave just like a virus, not bugs .

Wed, 10/12/2011 - 09:29 | 1765191 tarsubil
tarsubil's picture

The meme that humans are a virus is a virus.

Wed, 10/12/2011 - 07:11 | 1764848 I am Jobe
I am Jobe's picture

Goldman Sachs let off paying £10m interest on failed tax avoidance scheme

Leaked documents show top tax official shook hands last year on secret settlement described by sources as a 'cock-up'

http://www.guardian.co.uk/business/2011/oct/11/goldman-sachs-interest-ta...

Wed, 10/12/2011 - 07:13 | 1764854 GeneMarchbanks
GeneMarchbanks's picture

I'm sure Blankfein is scared... SIKE!

Wed, 10/12/2011 - 07:22 | 1764849 GeneMarchbanks
GeneMarchbanks's picture

Disregard the charts, paper price, rumor mill, etc. Just stack.

BTW:

http://www.bloomberg.com/news/2011-10-12/gold-eclipses-cocaine-as-rebels...

 

Wed, 10/12/2011 - 08:38 | 1765047 Smiddywesson
Smiddywesson's picture

Yes, paper is paper, whether it's a gold ETF or an oil ETF or a stock index.  Good fundamentals about the underlying don't change the fact that you are trading paper not gold, and that paper is subject to the whims of the king of paper, The Bernak. 

Stack physical. 

Wed, 10/12/2011 - 07:13 | 1764855 disabledvet
disabledvet's picture

in fact you could argue the exact opposite. in order to pay for this war the powers of Saudi Arabia and Iran would have to sell their oil and gold. We are getting one wild card after wild card now which begs the question will we ever know the true source of said oddities? (An Iranian assassination attempt of the Saudi Ambassador on American soil using Mexican drug cartel gangs? Both brazen AND weird.) Anywho futures are soaring so it would seem the world has placed their faith a stable USA and our ability to work our way out of our own catastrophe.

Wed, 10/12/2011 - 07:14 | 1764857 The Axe
The Axe's picture

i understand how gold would lift to the moon(Alice)  but step and step correlation for equities, makes no sense. Seems like another cover then euro, liquidity ramp.  short covering rally...

Wed, 10/12/2011 - 07:29 | 1764896 EL INDIO
EL INDIO's picture

I agree.

It looks like Gold is mirroring the Euro which is not a good sign.

The USD index seems to want to test the 50 DMA at 76 just like it did in 2008.

If history repeats itself, the USD should resume its rally after that (with a vengeance).

Wed, 10/12/2011 - 07:23 | 1764879 PaperBear
PaperBear's picture

"Mexican drug dealer to assassinate Saudi Arabia's ambassador to the United States" ?

Doesn't everyone know that in a recent court case a Mexican drug dealer cartel pleaded they were working for Washington DC ?

Wed, 10/12/2011 - 08:55 | 1765091 Pinto Currency
Pinto Currency's picture

 

 

Waiting for headline "MExican drug dealer with smuggled guns from Eric Holder to assassinate Saudi ambassador to the US."

Wed, 10/12/2011 - 09:54 | 1765336 DosZap
DosZap's picture

Paper Bear

Doesn't everyone know that in a recent court case a Mexican drug dealer cartel pleaded they were working for Washington DC ?

Why would it be so difficult to understand?.

We have CalderNuts, and Obama,on T.V. calling for stricter gun control,and CalderNuts saying the USA is the reason for the violence and cartels(while we train their officers military tactics)and THEN they go to work for cartels.(trained in the latest Mil Tactics)

Then we have Eric Holder getting caught HOLDING it,authorizing Operation Fast and Furious, with the POTUS's a/ok, and still calling for more gun control.

So far over 2000 firearms have been dumped by OUR GuB for use in Mexico.

Some are not making it in, one Fed officer is murdered with the weapons, and another murder with one is  El Paso.

Meanwhile CalderNuts is screaming bloody murder, that WE are the problem................and he is in collusion with the Feds allowing 2000 illegal weapons(more) into Mexico.

I say, screw em.

Holder needs to lose his job, and Obama needs to be impeached.

And CalderNuts need to STFU.

Corrupt SOB.

Wed, 10/12/2011 - 07:38 | 1764912 The Deleuzian
The Deleuzian's picture

Gold has not seen the blow-off top you would expect for terminal 3rd phase asset bubbles...The rest of the geopolitical stuff is just too incomprehensible for comment...Sorry!

Wed, 10/12/2011 - 08:27 | 1765024 mayhem_korner
mayhem_korner's picture

 

 

Is your moniker Euro for "the deluded one?"  You seem like a short-term minded, technical trader who froths at the mouth on the paper trade.  There is nothing about the gold market that resembles a bubble.  It is target #1 for sovereign statists who fear a return to real money.  But for their tamp-down tantrums, gold would be moving physically at some multiple of the Crimex posted price.  Stick around here and perhaps you'll gain some insight as to why...

Wed, 10/12/2011 - 09:00 | 1765083 The Deleuzian
The Deleuzian's picture

Hmmm??  You can buy physical gold?  But I don't have enough money for the big gold bars on TV...

And all that conspiracy talk...That's crazy

Wed, 10/12/2011 - 21:35 | 1768063 Pinto Currency
Pinto Currency's picture

 

No kidding.

 

And all this talk of inflation being a monetary pheonomenon and that the Fed is increasing the money supply - simply NUTS!!!

Wed, 10/12/2011 - 08:02 | 1764976 johny2
johny2's picture

Price of the gold on the manipulated market has little to do with news. When it goes down or up. 

Wed, 10/12/2011 - 08:46 | 1765072 Smiddywesson
Smiddywesson's picture

If I were manipulating the price of paper gold, I would wait for some geopolitical event to give meaning to a rise in price, let all the dorks who think gold prices reflect fundamentals jump aboard, and then run all their stops just after gold closes over the $2000 level, ruthlessly driving prices back to the $1600-$1650 range and demoralizing everyone that sits all day watching for some progress.

but that's just me. 

Wed, 10/12/2011 - 09:32 | 1765220 tarsubil
tarsubil's picture

Go ahead, make my day.

Wed, 10/12/2011 - 08:48 | 1765076 pmcgoohan
pmcgoohan's picture

The FED/JPM/Options/CME margin manipulations are part of the course, and we know we just have to punch the wall and live with them.

The biggest new threat seems to me that if China and India have been driving up the gold price, what happens now these economies have started crashing. China is likely in a bigger bubble than the US. Is it going to take gold down with it?

Gold might be currency in Asia, but that's no good if they arent generating wealth. Im thinking less about the Chinese CBs who surely must be wanting to diversify out of dollars, and more about your average citizen.

Wed, 10/12/2011 - 10:31 | 1765529 DosZap
DosZap's picture

pmcgoohan

If China and India start what we have been thru, they will INCREASE thier purchases,like we are.

It will be difficult for them to increase their purchases as they are up (both counties in double digits)over 2010 purchases, and the year is not even over.

The Indians are buying like nuts at the 1600 range,sales are up 28% YOY over '10.

China is increasing their yearly purchases(Gvt) 10% per yr, for the forseeable future.

In the  North Texas  area, the largest dealers here (institutional) are 6-12 weeks out on Slvr,and if you do not buy brand new gld coins double the prems,(there are no pre-owned coins for sale,that you would want,less prems).

Wed, 10/12/2011 - 10:55 | 1765705 pmcgoohan
pmcgoohan's picture

+1 for putting my mind at rest.

Im in the UK- got this email from my coin dealer today. They've had literally no coin stock for 2 weeks now...

"Due to the unprecedented demands for investment gold coins we are changing our price structure for 1oz gold coins. With immediate effect all 1oz gold coins will be bought at 100% of the London Gold Fix on day of receipt." 

Wed, 10/12/2011 - 09:05 | 1765112 Johnny Lawrence
Johnny Lawrence's picture

Come on with this gold stuff every morning...I'm a believer in the fundamentals of gold, but the correlation between this recent ramp in the stock market and the corresponding ramp in gold/silver is a little frightening to say the least.  I'd feel much more comfortable is there was a negative correlation between equities and PMs.  It's lockstep right now.

Wed, 10/12/2011 - 10:33 | 1765599 DosZap
DosZap's picture

Johnny Lawrence

 I'd feel much more comfortable is there was a negative correlation between equities and PMs.  It's lockstep right now.

When has it not been?.

Wed, 10/12/2011 - 10:17 | 1765510 Confuchius
Confuchius's picture

There are no Gold or Silver price manipulatrions.

There are only gold and silver PAPER price manipulations.

There is no metal available at the phoney "paper price"

Who, unless their IQ was in the single digits (hamy-the-wanker) would exchange metal for colored paper? Anyone doing so would be locked up in a padded cell to protect themselves from further harm.

Do NOT follow this link or you will be banned from the site!