Geopolitics, Iran and the price of gold and silver

It gave me no pleasure to read an article in the Gulf News this morning by former German foreign minister Joschka Fisher warning Iran that the US and Israel appear to be gearing up for a strike on its nuclear facilities before the change of US President.

Gulf News is published in Dubai which is a few hundred kilometers from Iran, so it is clear to whom the message is intended to go. The Israelis are apparently emboldened by the success of their strike on Syria recently, and fear the political ‘window of opportunity’ for action will go with George Bush’s exit from the White House.

I am not a political commentator and do not want to get involved in the politics of this matter. But from the standpoint of precious metal investors this is similar to the perfect storm that produced the price spike of 1980.

Then it was the Russian invasion of Afghanistan that scared the world stiff and sent gold and silver prices through the roof; and that was after the Iranian revolution in 1979 which had already destabilized the Middle East, and indeed precipitated the ill-fated Russian invasion.

Herr Fisher is clearly hoping that by stating the danger clearly Iran will behave in a manner appropriate to avoiding such a strike and its uncertain consequences for the region. It is not as though the Middle East is unused to living under the shadow of possible military adventures, and has avoided many such scenarios in the past.

However, this is another reminder of the role of gold and silver as safe haven assets in times of geopolitical uncertainty. Expect to see the price of precious metals rise significantly if tensions in the Middle East mount again, and there will be a sudden spike if anything actually happens.