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Gold Surges on High Geopolitical Risk of Israel Militarily Strike on Iran

Commodities / Gold & Silver Jul 02, 2008 - 09:43 AM GMT

By: Mark_OByrne

Commodities Gold surged to $942.80 in New York yesterday and was up $16.30 and silver closed at $18.20, up 78 cents.

Gold has succumbed to profit taking with the dollar flat and oil prices down marginally ( $141.30 per barrel <Light Sweet Crude Oil Future - Combined - AUG08> ). However, geopolitical risk remains ever present and this should result in gold remaining well bid at these levels.


While the ISM data yesterday looked benign and was greeted by an increase in risk appetite, a deeper look at the numbers was very worrying in that it showed a leap in the Index of Prices paid number. It came in at 91.5, jumping from 87.0 in May. This is the highest level since 1979 and shows inflation is real and deepening.

Geopolitical Risk From U.S. and Israel Militarily Confronting Iran is Real
Geopolitical risk and continuing tensions in the Middle East and particularly between the U.S., Israel and Iran are an important factor in recent price increases.

The U.S. Defense Department thinks it is increasingly likely that Israel will attack Iran's nuclear facilities by the end of this year.  An ABC News report quoted senior Pentagon sources yesterday saying that Washington was concerned Iran would strike both the United States and Israel in retaliation. One official said such an Israeli attack would have far reaching security and economic consequences, and the U.S. would be accused of cooperating with the Israeli strike. While the U.S. State Department has denied the reports, the ABC News report was just the most recent in a series of media revelations on the possibility that Israel would use force to stop the Iranian nuclear program.

Already the OPEC President has mooted the possibility of oil reaching over $170 per barrel this summer on supply demand issues alone. Were there to be a military confrontation between the U.S. and or Israel and Iran in the coming weeks prior to President Bush leaving office, some informed commentators have mooted the possibility of oil surging to over $200 or even $300 per barrel. Iran has threatened to close the Straits of Hormuz if attacked, cutting off a quarter of the world's oil supply.

Peru's nationwide mining strike has entered its second day as miners demand for a fair share of surging profits. Peru is the world's largest silver producer, and this is likely to result in silver remaining well bid and outperforming in the coming trading sessions.

Today's Data and Influences
Activity has been subdued in Asian and early European trade as many investors appear to be waiting on  the sidelines ahead of tomorrow's ECB policy meeting and the ever-important monthly U.S. non-farm payrolls.

Attention today will be on the ADP employment report, which may give an indication as to Thursday's official payrolls data. Markets will monitor comments from US Treasury Secretary Paulson who is due to deliver a key note address on the economy and markets and more ‘jawboning' of the dollar is to be expected.

Silver
Silver is trading at $17.90/17.93 per ounce (1200 GMT).

PGMs

Platinum is trading at $2057/2063 per ounce (1200 GMT).
Palladium is trading at $460/464 per ounce (1200 GMT). 

By Mark O'Byrne, Executive Director

Gold Investments
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Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

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Gold and Silver Investments Limited hope to inform our clientele of important financial and economic developments and thus help our clientele and prospective clientele understand our rapidly changing global economy and the implications for their livelihoods and wealth.
We focus on the medium and long term global macroeconomic trends and how they pertain to the precious metal markets and our clienteles savings, investments and livelihoods. We emphasise prudence, safety and security as they are of paramount importance in the preservation of wealth.

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Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. Past experience is not necessarily a guide to future performance.

All the opinions expressed herein are solely those of Gold & Silver Investments Limited and not those of the Perth Mint. They do not reflect the views of the Perth Mint and the Perth Mint accepts no legal liability or responsibility for any claims made or opinions expressed herein.

Mark O'Byrne Archive

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