gold - war & post war scenario

  1. 9,081 Posts.
    The market is a contrary beast - and often does the unexpected.

    The consensual expectation is that the POG will fall sharply, either when war is declared, during the war or when the war is over.

    But I am not so sure:

    What if the conflict is difficult and protracted?

    What if a spate of "jihad inspired" terrorist attacks inflict mayhem and catastrophe in the USA, Britian and ...yes ...even Australia? Bombings, chemical attack, the release of deadly toxins etc are all plausible war and post war scenarios than will destablise economies and enhance gold's safe haven staus (and price)

    And there are other sources of global tension that will not just evaporate overnight:

    - the Arab / Israeli dispute shows no sign of ending and with the recent re-election of the Hawkish Sharon, things are destined to worsen.

    - tensions between the nuclear powers India and Pakistan over Kashmir are unresloved ... they are on a slow simmer and could boil over at any time.

    - Blair has intimated that "North Korea" will be next - what a can of worms that will open.

    Any or all of the above will conspire to drive the price of gold higher.

    Although not as sensational, but perhaps even more important for the continuing bull market in gold, is the perilous state of the US economy, its burgeoning debt and the extreme, and long term pressure that the US $ is under.

    A loss of confidence in the fiat monetary system (rather than the extreme view which postulates a total collapse) could be another key factor in the sustainablity of a long term bull run in gold.

    These view are not secret or classified information and I am sure that savvy market players are cognizant of them.

    Quite possibly any pullback in the POG that occurs when, during or after war breaks out will only be short lived and will be seen as a buying opportunity by those hoping to pick up gold / gold stocks cheaply.

    Maybe the touted big fall will not occur at all .... even if it does ... in time, as the bull run in gold gathers a new head of steam, the "fall" will appear as a minor "blip" on its ever ascending chart.

    Remember, we are coming out of a 20 year bear market in gold ..... it has a long, long, way to go.
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