The Effects of The Events In Iran On Gold

January 23, 2020
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Gold is known as a hedge in times of crisis or impending doom and things got dangerously unstable when a US military drone killed a prominent senior Iranian General, Qassem Soleimani on the 2^nd January 2020. The price of gold shot up above the $1,550. It hasn’t been at this level since 2010. That was gold reacting to on event with potentially catastrophic repercussions. As the world worried about the potential retaliation, the U.S President offered no apologies, instead he was sticking to his guns.

The U.S actions heightened the risk of unrest in the Middle East. There are old wounds that run deep and for weeks everyone was fearful of being thrown back into the post 9/11 situation and the “fight against terror”. The world is no safer because of the actions that America took in Iraq and Afghanistan. Instead some would say, it was the beginning of the seemingly unending conflict that has spread throughout the Middle East.

America says it has good reasons for killing Soleimani. They believed or had good reason to believe that he was planning something sinister against America. The problem however is that actions like these tend to have serious blow back.

Any conflict in the Middle East always has some unintended consequences like the disruption of the supply of crude oil. This could have a negative effect on the U.S economy. The U.S economy itself of might not be that vulnerable but ordinary people still need oil. If it becomes scarce, then it becomes expensive and with already rising prices consumers are feeling the pinch. People have to buy energy, they buy things that are transported using energy that comes from oil.

The effects may also be bad for the bond market and the U.S Fed will try to minimise the negative effects by using with quantitative easing to keep inflation from pushing long term interest rates high.

The main reason why the price of gold will go up is the Fed. However, with the current shaky geopolitical risk, it should be no surprise that the demand for gold will be high.

Gold entered 2020 with some momentum and the traction it already has only makes it a better hedge especially under the current geopolitical atmosphere. History tells us that under such circumstances gold will only rally even higher. With other threats like the U.S president’s impeachment and the US-China trade deal, gold as a hedge, is a no-brainer.

There are some people that are worried and sceptical about the current gold rally. People are nervous and maybe they have reason to be. The last time gold reached $1,550, there was a correction. Investors are anticipating that the same thing will happen with this current Iran blip, that there will be a steep pull-back once Iran settles. There is an assumption that gold will sell off and they are selling their gold in anticipation. This could happen. However, the big picture is that gold will go up and will continue its bull trend, maybe it will hit a wall when it reaches $1,600 and correct or even hit $2000 it will correct. Due to constant central bank currency debasement any dip in the gold price is a buying opportunity. You never know if it’s the right time or not whatever you decide to do with your gold you need to make sure it is the right decision to make right now.

This article was brought to you by:

Brisbane Gold Company

Suite 3a, Level 3/ 144 Adelaide St

Brisbane, QLD 4000

https://www.brisbanegoldcompany.com.au/