Proving once again that explosive geopolitical developments trump any and all bullish wagers made on anticipation of future inflation, or the future fate of the US dollar, gold prices soared on Monday as the "Jasmine Revolution" (or, will it eventually become known as the "Twitter Revolt?") spread and intensified. Any bearish thoughts among traders were placed on temporary ‘hold' on Monday, amid such conditions as the missive of the day read: "Fear and Hoarding Worldwide." No need for gold “gurus” to trumpet the obvious and time-tested wisdom of a ‘war insurance’ position in gold all over the media at this juncture. They did it anyway however, just in case folks were…distracted.
It's as if the G-20 had not even taken place this past weekend. Who was going to care about post- G-20 meeting briefings when Benghazi buckled and Tripoli teetered? In brief, when bullets fly, gold tends to do the same, and, that, it sure did yesterday, despite the closure of the pivotal New York market. The fallout of white-hot embers from the recent events in Tunisia and Egypt has now landed as far away as Morocco, Iran, and – over the weekend – even China, and they are sparking social unrest on a scale not seen for many decades.
People in various nations have evidently had it with oppressive regimes and with keeping the privileged few in...privileged positions. Most of the developed world has been left speechless (and, largely action-less as well) by all this, but the rising levels of apprehension are quite palpable in the West as the grassroots upheavals keep spreading at the speed of the Internet. Although Mr. Gaddafi responded with tanks and planes to the demands of protesters, his grip on power remains as fragile as the umbrella he is holding against the winds of change in his country. Several Libyan officials have resigned and some fighter jet pilots defected to Malta rather than add to the bloodshed that has already reportedly resulted in the death of some 400 civilians. Memo to Gaddafi BFF Hugo Chavez: Do keep that guest-room bed made for “The Colonel” just in case he signs up to star in a sequel to “Out of Africa.”
Had Monday been a 'normal' trading session, we might have well have had a $30 up-day in gold in New York. True, the US dollar received its 'fair' share' of safe-haven bids, as it continues to, this morning as well, but just look at crude oil igniting and flaring up into a 5% to 7% (larger than Friday) fireball of value on the back of deepening Libyan chaos. We are talking about the fourth largest provider of black gold on the African continent here, and the threat of supply disruptions in the wake of possible acquisition of the control of power by Libyan separatists is as real as the gains we saw in the commodity on Monday, as well as this morning. Meanwhile, Saudi Arabia’s oil minister said this morning that his country has ample spare capacity and could easily cover any potential shortfalls in crude oil supplies resulting out of the Libyan situation.
While Europe stands to feel the brunt of any glitches and/or huge spikes in the flow or prices of crude (not to mention the possible influx of desperate humanity trying to flee the various maelstroms), the rest of the world is also watching all of this with a very worried eye, as it might not take much to morph the emergent global economic recovery into something quite…the opposite, given the development of certain scenarios that are best left not entertained. So-called “recovery” metals (copper) fell hard in the wake of the events that present the potential for a return to difficult global economic conditions.