Global Uncertainty Rises

By: Julian D. W. Phillips | Tue, Aug 15, 2006
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From - Gold Forecaster - Global Watch 14th August 2006

In a week where we were all faced with the drama of international Terrorism [I too got caught up in Gatwick Airport on my way to Spain], many wondered just why the gold price did not jump. This leads to the question, what will trigger a gold price rise? Will any news event such as last week’s events set off the market? Yes, they will, but the trick is to understand the difference between a bomb in Bali and a kidnapping in Nigeria.

Global uncertainty has to affect the fundamentals of the global monetary system in such a way as to cause a money manager to feel he should buy gold, because he feels the risks facing his fund are such as to give cause for concern on his investments. Gold as history has shown, particularly over the long-term has demonstrated just how effective it is in an environment that gives rise to doubts about a stable financial future.

So a bomb in Bali or foiled Terrorists, may make international travel worrying, but will not affect the state of the global investment scene or monetary system. What such events do, do is to take the risk of a confrontation between a democratic, developed and Western world and an oil controlling Islamic world to a higher level. A kidnapping, in Nigeria, of oil workers, shuts off production of oil from that source, tightening the supply of oil to the international oil market. This can lead to higher oil prices, which in turn affect consumer spending and global growth.

The pricing of oil in Rubles has a heavy impact on the U.S. $ because every Ruble bought for that purpose is a U.S.$ not bought in the market place, so undermining the dominance of the $. Whilst this is not a dramatic change in world events, it is an effective gold price trigger, unlike the more newsworthy events.

Beneath that though lies the trend towards greater confrontation, such as the possible involvement of U.N. troops in Lebanon. In essence this will be a dramatic change in world affairs as a global body, having been toothless in the past is given teeth, whilst empowering the only global political body against Hezbollah. More and more Islamists are seeing this in the context of their religion involving 900+ million across the world. The effect is like the heavy build up before the first crack of lightening flies and the rain begins to fall in a thunderstorm. Suddenly, the swing from nationalism to religion in the Muslim world takes hold and a Muslim Briton or American becomes a British or American Muslim.

The British Muslims have watched British policies in Afghanistan and Iraq, and now in Lebanon, and have a grievance against their British government. In a few cases this is expressed as extremism and violence. But for many others, it has meant a sharpening of a continuing struggle between two competing identities. In a recent poll of Muslims in 13 countries 81% of those surveyed in Britain said they considered themselves Muslims first and Britons second. That contrasts with Spain, where 69% of those surveyed considered themselves Muslims first and Spaniards second, whereas in Germany, the comparable number is 66%, and even Jordan, with 67%.

Suddenly the 100,000 potential, extremist recruits, becomes 1,000,000 and the chances of it escalating into a reaction at Islamic governmental level rises. As many of these have are suppliers of oil, the danger of them using oil supplies as a weapon rises too. Any one of several countries has the power to do that. At present Iran is at the forefront of these.

So the oppressive atmosphere that precedes the storm gets heavier and heavier. As it progresses towards the bursting of the storm the event that triggers the storm gets smaller and smaller. Remember it took only one bullet, killing and obscure Archduke to trigger the first World War!

As we get close the gold price will act like a barometer rising in price, steadily to far higher new levels!

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3-11. Central Bank Gold Sales in 2006/ Gold E.T.F. - holding tonnage on the fall in the gold price/ The dilemma facing Producers / Global uncertainty rises/ U.S. $ & its Prospects / The Oil crisis / Gold: Oil Ratio / Dow Jones / Technical Analysis of the Gold Price: Long / Gold price drivers 2006 / Short term in the U.S. $ / Treasury Notes / CRB Index
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Julian  D. W. Phillips

Author: Julian D. W. Phillips

Julian D. W. Phillips
Gold Forecaster

Julian D. W. Phillips

"Global Watch: The Gold Forecaster" covers the global gold market. It specializes in Central Bank Sales and details, the Indian Bullion market [supported by a leading Indian Bullion professional], the South African markets [+ Gold shares shares] plus the currencies of gold producers [ Euro, U.S. $, Yen, C$, A$, and the South African Rand]. Its aim is to synthesise all the influential gold price factors across the globe, so as to truly understand the global reasons behind the gold price.
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