Gold Takes Off

Although it probably doesn’t come as too much of a surprise to veteran investors, the price of gold has soared to five-month highs recently as twin crises in Syria and North Korea have political watchers on edge and extremely anxious about future events in those regions.

Some investors have even taken steps to move some of their portfolios to safer asset classes as heightened tensions on the Korean peninsula and in the Middle East reflect a new willingness by the Trump administration to solve problems with force rather than via inactivity or passivity.

“When you put that mix together: Syria, Trump, North Korea — it’s a volatile thing,” observed Jonathan Barratt, the chief investment officer of Ayers Alliance Securities in Sydney, Australia. “It’s that uncertainty that people are concerned about.”

“Gold has finally broken and closed above its 200-day moving average at $1,257.50, which now becomes a support. From a technical perspective, the way is clear for a run at $1,300 and possibly higher,” stated Jeffrey Halley, a senior market analyst with foreign exchange firm OANDA. “A serious escalation [of either conflict] could see gold to the $1,380 to $1,400 area tout suite, but it would have to be really serious.”

In the last two weeks, North Korea has given the United States multiple warnings of imminent nuclear strikes due to joint U.S.-South Korean war exercises and the movement of a U.S. naval battle group led by the aircraft carrier USS Carl Vinson to a position 300 miles off the shores of the former country’s coast.

In the meantime, President Trump warned the North Koreans that a new nuclear test (which would be the country’s sixth) or the launch of an intercontinental ballistic missile (ICBM) would be grounds for the United States to attack their country.

Trump tweeted that the North Korean regime was “looking for trouble” and that the U.S. would “solve the problem” in the region with or without the assistance of ally China.

On April 15, North Korea’s “Day of the Sun” commemorated the birth of its first leader Kim Il Sung, and the pariah state held a military parade in which it showed off a new series of missiles alleged to be the new ICBMs it’s been developing.

While Western sources say the development phase of the missiles is far from complete, the impudent display of force rattled observers and only ratcheted up pressure that’s been building for years as the country has been allowed to work on its weapons programs unfettered.

On the morning of the following day, April 16, it was reported that North Korea had indeed launched a missile, but it had blown up seconds after launch, possibly on the launchpad itself. Whether this was an accident or a case of sabotage (or possibly the result of an American weapon being used) remains unknown.

But with Chinese forces reportedly massing on the North Korean border and Japan ordering the evacuation of at least 57,000 of its citizens from South Korea, it’s clear that tensions will likely remain high in the region until the North Korean government either makes voluntary or forced progress toward nuclear disarmament.

In the other current geopolitical hotspot, Syrian leader Bashar al-Assad has been accusing the United States of fabricating charges that a chemical weapons explosion on April 4 was caused by his government. This resulted in a missile strike on a Syrian airfield ordered by President Trump.

On April 7, 59 Tomahawk missiles were launched from two Navy destroyers stationed in the Mediterranean Sea, all of which struck their targets with incredible precision. The strike came as Chinese President Xi Jinping was having dinner with President Trump at the latter’s Mar-a-Lago estate in Florida.

Not only did this strike send shockwaves through the Chinese government, but it most assuredly rattled other regimes around the world (likely including North Korea). This was just the latest action in the nearly six-year-old Syrian conflict that’s claimed the lives of 500,000 civilians.

This marked the first time the United States has responded to a devastating attack with such overwhelming unilateral force, as opposed to merely providing weapons and aid to opposition groups in the country, many of which are aligned with terrorist organizations ISIS and al-Qaeda.

And the strike in Syria wasn’t President Trump’s only show of force in the last two weeks; in Afghanistan, the United States dropped its most powerful non-nuclear munition, the 21,600-pound MOAB — short for the Massive Ordnance Air Burst, but nicknamed “the Mother of All Bombs.”

This formidable superweapon was responsible for the death of 94 ISIS soldiers, and its use, too, also sent shockwaves throughout the region and around the world, with some political leaders appealing for calm and diplomacy amidst the vigorous bombardment.

Less publicized was the fact that the U.S. flight-tested an unarmed version of another weapon, this time within the borders of the United States — the B61-12, a new type of nuclear bomb. Although the weapon was not “live” when it was dropped, the timing of its test raised additional eyebrows.

Adding to global anxieties has been hand-wringing over elections in France and the meeting of U.S. Secretary of State Rex Tillerson with President Vladimir Putin of Russia. These events are likely to only contribute to a continued rise in precious metals, with gold seen as a haven in times of apprehension.

Whether the metal will soon revisit the highs seen in late 2011 remains to be seen, but given the current geopolitical climate, it’s not out of the realm of possibility.


Ethan Warrick
Wealth Authority