As an old school metals trader I am fortunate enough to have many friends that I trade with in the Middle-East.
This week I had one of my friends from Dubai come by our headquarters that overlooks the river here in downtown Chicago. Over cups of strong black coffee, we caught up on family and our fellow traders and their comings and goings, and as time progressed we ended up talking about Iran. With the Iranian talks permeating the news I really wanted to take the opportunity to get a boots on the ground overview of how the potential signing of a nuclear non-proliferation agreement would impact the gold market.
Much to my surprise a counter intuitive answer was formulated with deference to the ever changing events unfolding. He told me that Dubai was smack dab in the middle of ground zero for the coming peace agreement and that the Iranian people love gold and given the possibility of a treaty they will flood into the gold market as buyers. So as see it now, with the advent of a signed agreement, the price of gold will drop in price almost instantly there by creating a brief vacuum in the physical gold market only to be overrun by a ground swell of demand coming out of Dubai to meet Iranian demand.
As always I’m not a strong proponent of “buy the rumor and sell the fact" trading but with good timing this could work out for well for all our refiners and recyclers as a new solid recurring source of demand will throw a floor under the metals in short order. So once again I look to the gold Souks of Dubai to signal a direction for the underlying price of gold.