ISrael/Iran And Gold: Much Ado About Nothing
At first glance Iran sending 300 missiles and drones to attack Israel on Saturday had the hallmark of a major war escalation event … there are some hot heads in the Middle East and things could rapidly spiral out of control.
Gold responded with a knee-jerk rally, gaining $30 - ahead of events - on the Friday NY close to notch up a fresh all time high at $2430, before shedding nearly $100 and now sits comfortably above those lows.
And that's the thing … gold rallied BEFORE the strike, and that's because Iran gave Israel a 72 hour warning of the attack. Meanwhile the US had prepared its press release to de-escalate things as the drones took to the sky.
One has the sense of being 'played' here.
I would bet this passes without significant repercussions. What kind of war is it that requires such careful choreography ? Meanwhile all sides come away with a win … Iran can claim pride restored following recent harms (Gaza and taking out of Hamas leadership), Israel can trumpet its wider international support and its military competence, the UK can herald its undying love and support for anything the US does (while the US looks about 3 inches above the UK's head to see if there is anyone more interesting in the room to talk to) while the US can declare itself the grown up in requesting restraint while seeking to regain some credibility in the Middle East - a region much looking East for leadership. Scores of political leaders around the world are joining the chorus urging restraint, just before accepting plaudits for saving us all from WW3.
Meanwhile scores have been settled … no population centres were targeted and no one died … and Israel will have a few holes to fill. And arms dealers can looks forwards to some fresh orders ... what a great war. Sorry - full bore cynicism today !
Yes, this is meant to be about gold, I know that.
Oil scarcely blinked, but gold was unusually reactive. In the old day (2 months ago +) it would have been the other way around. But gold is not itself these days.
While those travelling on the little financial lifeboat that gold provides will be delighted by recent price action, gold has moved a very long way in a short space of time from its core and traditional buyers. Gold ETFs continue to bleed-out, net speculative positions have crested, central bank demand in February shows signs of waning and physical coins and bar demand in the West (outside of China) remains deeply moribund.
I suppose if there is any take-away it is to be careful what you wish for. The scale and speed of the movement in gold has not really reinforced gold's quality as the steady, reliable long term store of value and instead it seems to have borrowed some clothes from its rather more excitable cousin, bitcoin. It wasn't supposed to be this way.
Ross Norman
MetalsDaily.com