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Geopolitical Uncertainty
March 3, 2006

What could the Iran crisis mean for gold?

Oil War Economy

The Price of Gold

The element that has accelerated the price of gold is the fast changing dynamic of power in the Middle East and all that such an event means. There are four practical choices now:

1. The UN invokes economic sanctions against Iran.
2. The US and GB invoke a coalition of the willing for economic sanctions against Iran.
3. The US and GB act militarily against Iran.
4. Nothing whatsoever happens.

If the US, GB and the other usual suspects invoke economic sanctions against Iran then that will be a declaration of economic warfare. It would be foolish to assume this could happen and Iran would not fight back. This also goes for the UN invoking economic sanctions. Iranian retaliation would involve cutting the supply of oil. Regardless of what is said by the Iranian Minister of Energy, Iran will significantly reduce crude oil output.

If the US and GB hit Iran militarily only deep penetration bunker busters will have a large enough impact to dismantle their nuclear plans. It would be shortsighted to assume that Iran with delivery systems that can reach Europe would refrain from launching their purchased nuclear warheads. That would start something so awful such an action can ALMOST be ruled out.

The other alternative is to do nothing but scream and threaten some more. This would turn into a crisis in leadership. Iran taking the position as the central entity in the Middle East, supported by their Chinese and Russian friends, would still occur.

This is why gold is threatening to breach $682 much earlier than expected. Unless this dynamic changes the basic up trend in gold will hold and we may well be in the major move right here and now for geopolitical reasons.

*This information is solely an excerpt of a third-party publication and is incomplete. Please subscribe to the referenced publication for the full article. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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