Diplomat Safes Kuwait
Diplomat Safes Kuwait
Gold and Conflict
The stock market may hate periods of uncertainty, but the gold market seems positively to thrive on it. The sight of baying protestors facing down the tanks in Egypt was widely credited in the media with giving gold its best day since October. But is gold really the safe-haven investment that popular wisdom says it is? And is the recent sell-off in the yellow metal over yet?
Taking a very long-term view, gold hasn’t actually been a great thing to own in times of high tension and conflict. Looking back at the dozen or so biggest wars of the last two-and-a-bit centuries, the price of gold adjusted for inflation has usually gone down, rather than up. Admittedly, it’s done better in recent decades, rising during both the Vietnam War in the ’60′s and America’s “War on Terror” since September 2001.
As traders, of course, we’re obviously most interested in the short-term reactions of gold to major incidents, such as the recent instability in Egypt, Tunisia, Lybia and Syria. A straw-poll of serious flare-ups in recent years seems to back up the idea of gold’s usefulness when diplomatic nerves are jangled. The metal shone during North Korea’s artillery attack on South Korea last November, as well as after the 9/11 attack on New York and when Iraq attacked Kuwait in 1990.
Of course, incidents like these are virtually impossible to predict. So, the most sensible approach is to seek trading opportunities when conflict moves the price in the direction of the main trend. Gold is obviously in a massive uptrend, so I am looking to use events like the Egyptian revolution and Lybian war as possible opportunities for entering long trades.
As of Monday 31 January, there wasn’t much follow-through from the yellow metal. As such, it’s too early to call the end of the sell-off. But I certainly wouldn’t be shorting this stuff right now. I am convinced the drop from the recent highs above $1430 will prove to be nothing more than a blip in gold’s super-bull market run. A bit more selling down to around $1300 and then a bounce would be perfect for getting long here.
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Today in Washington (April 9, 2009)