DEVNER, CO — There is nothing more bullish for gold, not even the rapidly accelerating woes of the U.S. dollar, than the destabilizing scenarios that would come with serious global geo-political chaos.
While I have written at great length in past years about the growing unsustainable debt structure of the U.S. government and the ultimate consequences to the dollar, I am becoming increasingly concerned with the current geo-political scene, a factor that could quickly become the number one driver for much higher gold prices.
Recent events, where Muslim leaders publicly have incited hatred towards the U.S. and Israel, while openly denying the holocaust, are starting to get many people concerned that they may follow-through on what they threaten.
The former influential president of Iran, Rafsanjani, has said Iran could suffer 15 million dead in a nuclear war with Israel, but went on to say, "that would be a small price to pay for a billion Muslims in order to rid the world of Israel".
On top of this, Iran’s current president Ahmadinejad is also calling for Israel’s destruction openly in public, while he defiantly mocks America’s threats to stop him from going nuclear.
The current mess in Iraq, along with the growing unrest in the U.S. over the war, has now placed George Bush in a very weak position politically.
The only way the U.S. can still avoid a total defeat is to strengthen the new Iraq government and allow for a slow withdrawal of U.S. troops. Leaving Iraq without such stability would be disastrous for the U.S. and almost a guarantee for an even larger problem in the future.
The unsettling fact is that this stability will not happen unless Iran can be persuaded to cut off the aid that is flowing across their border to Iraqi insurgents. The main bargaining chip in that negotiation will of course be that the U.S. ends all opposition to Iran’s nuclear development.
Bush may have to cower to this demand in order to help him get out of the very complicated Iraq mess, which continues to divide America.
Unfortunately, even if that were to happen, Israel will never accept a nuclear armed Iran, and would most likely act on its own behalf.
So it appears to me that the world is in a very tenuous and rapidly deteriorating situation that could severely damage geo-political stability and lead to much greater conflict, possibly even a third world war.
The effects of such a condition would drive the gold price into the stratosphere!
While I believe most of us always hope that war can be avoided, the likelihood of that with the current and accelerating conflict is quickly diminishing.
I recently had this conversation with an associate of mine, who asked the obvious question for anyone hoping for the best, "Why can’t we all just get along? Why is there such a conflict between Islam, Christians and Jews?
The answer to that question goes back thousands of years when the conflict first started. For those not familiar with this story in the Old Testament, I share it only that you may have a better understanding on why this conflict exists, not for any religious message.
The story can be found in chapter 20 of Genesis. Abram and Sarai desired to have children. God made a promise to Abraham that his seed would be numbered as the stars are in heaven.
But, after much time and no children, Sarai was barren and past the age of child bearing. Their names are then changed to Abraham and Sarah.
So in order to have children, Sarah, gives her handmaid Hagar, an Egyptian, to be his wife for the purpose of bearing a child. Hagar does bear a child from Abraham and the boy is named Ishmael.
Thereafter, Sarah in her old age is told she will bear a son, which she does who is named Isaac.
God says that he will bless both Ishmael and Isaac, but that God will establish his Covenant with Isaac, not Ishmael.
This is where the turmoil begins, but then it gets worse.
In verses 9 through 14 of chapter 20 in Genesis, it reads the following:
And Sarah, saw the son of Hagar the Egyptian, which she had born unto Abraham, mocking. Wherefore, she (Sarah) said unto Abraham, cast out this bondwoman and her son for the son of the bondwoman shall not be heir with my son, even with Isaac.
Hagar and Ishmael are cast out from Abraham’s household and are sent out into the desert. And thus one of the greatest conflicts known in world history was born.
The descendents of Ishmael are what is now known as the Arab or Muslim population, while Isaac and his descendents are the Jewish population. Jesus, a Jew comes out of the Jewish line and teaches a new law and Christianity begins.
With or without a war that centers on the Middle East, gold is an asset class that every investor should hold to protect against financial and or geo-political risks, whatever you may perceive them to be.
While we can always hope for a good outcome in world affairs, planning for the opposite is critical for financial survival. Keeping a portion of your wealth in gold is a very prudent decision at this juncture and I believe will prove a wise choice as future events unfold.
Most of what happens in the big picture is largely out of our control. What is in our control is to do what we can on an individual basis to protect our loved ones and what we have worked so hard to save and accumulate.
Do you own gold? If you don’t I believe you will find yourself financially naked at some point in the near future.
When the masses suddenly discover how they need gold to protect themselves financially, it will be too late for most investors. That is because the gold market is so tiny compared with most other financial markets. Once the rush starts there won’t be any room to receive it. Those who got in early and held will be the big winners. Those who didn’t will lose.
Owning gold today may be as relevant and important for one’s temporal survival as was Noah’s command to help build and get on the arc because it was about to rain.
But alas, most people won’t heed the call to own gold, just as they didn’t heed the call to help build the arc, and probably for many of the same reasons.
However, the clock is ticking, and that ticking noise you hear is starting to sound more like a timer that will have a bad conclusion.
Until next time,