The current economic and geopolitical landscape is filled with potential landmines, and the climate just got even more tedious. Over the weekend, an attack on Saudi oil facilities reportedly cut production by some 5.7 million barrels per day, or over half of the Kingdom’s production. This amount accounts for about five percent of total global oil supply and could send crude oil prices soaring. Brent crude jumped by about 20 percent after the news, while WTI also made a significant double-digit leap.
Thus far, it has been reported that the U.S. believes Iran to be behind the attack, although Iran has denied involvement.
The U.S. stands ready to use military force, if necessary, to secure the global oil supply. While no military action appears to be on the table yet, the situation does have the potential to lead to another reason for armed conflict.
The attack on Saudi oil facilities represents not only an attack on the Kingdom and its interests, but an attack on the global economy as well. A rapid and significant surge in crude oil prices has the potential to put the global economy into a full-blown recession. As energy costs rise, consumer spending declines-it’s that simple.
The attack on the global crude oil supply also presents another potential problem.
As the Fed and other global central banks look to fight the ongoing economic slowdown, monetary policies will continue to be increasingly dovish.
A sudden and sharp rise in crude oil costs could, however, prevent central banks from necessary easing. As oil prices surge, inflationary pressures could not only make it impossible for central banks to ease but could force them to even tighten. At this delicate juncture, a lack of accommodation from central banks would almost certainly send the global economy into a recession, and central banks would have to figure out alternative ways to combat a recession without the use of their primary tool.
The current economic and geopolitical landscape already warranted the acquisition of hard assets, and the recent oil attack only reinforces that notion. With so many potential issues that could not only put the global economy into recession but could also fuel significant risk aversion, now may be the ideal time to build a significant allocation in an asset class that may potentially outperform as financial markets become increasingly strained. With its unlimited upside potential, its ability to provide a hedge against inflation and its overall history and reliability, there may be no better asset class to look to than gold.
Adding this key asset class to your holdings has never been easier, and perhaps never more important. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership and to learn more about the role it may play going forward. Our associates are here to answer any questions you may have and can even show you how to build a significant allocation using an IRA account.
Don’t wait for the net major stock market meltdown or for the next global recession to hit before taking action. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: central banks, consumer spending, crude oil, energy costs, global economy, global oil supply, inflationary pressure, market strain, Saudi oil