Gold Hits Two Week High As Geopolitical Landscape Deteriorates

Gold prices hit a two week high yesterday as a mixture of fresh buying along with short-covering drove prices back above the psychologically key $1300 level. Although gold has breached this level to the downside on a few occasions in recent weeks, each and every time buyers have stepped in to scoop up the yellow metal. This is not surprising to us, as we feel the likelihood of gold prices seeing any significant drops given the current state of global affairs is unlikely. So-what exactly is driving gold and precious metals right now? Let’s take a quick look at some of the major underlying issues that could potentially send bullion prices sharply higher:

  RUSSIA- The conflict between the U.S. and Russia over Ukraine appears to have no end in sight. In fact, the situation continues to escalate. Many are now comparing current U.S./Russian relations to the cold war. The U.S. and some of its allies have placed numerous economic sanctions on Russia in order to try to “persuade” the country to leave Ukraine alone. Russia has, thus far, held steadfast. It is now expected that Russia will attempt to counter with some type of economic sanctions of its own.

ISRAEL/HAMAS- The fighting in Gaza has raged on for nearly a month now. Currently in the midst of a three day cease-fire, the two sides are once again trying the diplomacy route. The sides do not appear to be very close, however, and the New York Times has reported that a key topic of discussion is the disarmament of Hamas. The next day or two will bring steps forward in negotiations or unfortunately a return to the fighting.

NORTH KOREA- Although not at the forefront of current headlines, North Korea does remain a concern for American leaders. International leaders remain concerned over the potential for the country’s nuclear program among other things.

IRAQ- The situation in Iraq has also been on the quiet side in recent weeks. This situation, however, does not appear to be any closer to some type of resolution. Although crude oil prices have come down in recent weeks, should the situation in Iraq deteriorate we could potentially see oil prices skyrocket. Unfortunately, any instability in this part of the world can potentially have deep and long-lasting effects on global markets.

As if the current geopolitical backdrop were not enough to drive risk-aversion, there are remaining economic worries as well. The U.S. equities markets are finally showing some signs of cracking, and interest rates have been falling. The Eurozone remains a particular area of concern, as the region battles deflation and falling prices. Italy has once again reported that it is in the midst of a recession which is its third since just 2008. This past week, the German five year bond, or Bobl, hit a record low yield of just .28 percent. This, along with falling stock markets and rising bond and note prices would seem to indicate that risk aversion is beginning to gain a tighter grip on world markets. This could potentially work to gold and silver’s advantage as investors seek to reallocate cash to perceived safe-haven assets such as precious metals.

If you are concerned about the current geopolitical landscape, or are simply looking to add hard assets to your investment mix, precious metals can be a great choice. For more information on the potential benefits of adding gold, silver or other precious metals to your portfolio or IRA account during these uncertain times, please contact an Advantage Gold specialist today at 800-341-8584.