Nuclear Chicken

Over the weekend, North Korea reportedly performed a successful test of a hydrogen bomb. The underground test caused significant seismic activity, and state media was quick to call the test a success.

This latest provocation by North Korea has upped the stakes once again. For those of you who do not know what a hydrogen bomb is, it is a nuclear device that uses fusion (or the joining of atoms) rather than fission (or the splitting of atoms) to release energy. The fusion bomb is far more powerful than a standard fission bomb, and a successful test by North Korea would seemingly demonstrate that the regime has made some major strides in its nuclear program.

The U.S. and its allies are likely to crank up the heat on North Korea with a measured response which could include further sanctions and actions designed to isolate the nation further. The question is: Will such actions be effective?

Diplomacy has failed thus far to produce any change of thinking by the North Korean regime, and economic sanctions have also failed to stop the country’s nuclear ambitions. It does seem like the U.S. and its allies are running out of options, and some type of military option could potentially be considered.

The fact is, however, that there do not appear to be any good military options. Any attack on the North could result in a massive attack on South Korea, Guam or even Japan. The U.S. and its commanders will certainly take this into consideration, and will likely exhaust non-military options before any armed conflict is considered.

The ongoing threat from North Korea could keep risk aversion rising, and markets around the globe are not taking news of the latest weapons test lightly.

The ongoing threat from North Korea is only one of several issues that may currently be fueling buying interest in gold. On Friday, the U.S. Department of Labor and Statistics reported the country added 156,000 jobs in August while the unemployment rate ticked slightly higher to 4.4%. This figure was well below some estimates of 180,000 jobs added and could potentially give the Fed something to think about as it considers another rate hike this year.

The ongoing lack of inflationary pressures could also influence the Fed’s plans, and any major misses in data in the coming weeks could keep any further rate hikes on hold until next year.

A weak dollar may also support gold. The greenback has been trending lower for months now, and is close to embarking on another significant leg lower. With little inflation, a dovish Fed and gridlock in Washington, the dollar could remain under pressure, driving gold higher in the process.

Whatever the case may be, charts show gold moving higher. Given the current state of geopolitics and the potential for a major top in stocks, now may be the ideal time to consider an allocation in gold.

Speak to an Advantage Gold account executive today about the potential benefits of gold ownership. Our associates are here to answer any questions you may have, and can even show you how to buy and hold gold using your IRA account.

Don’t wait for the next major stock market crash or for gold to move higher before taking action. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started today.

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