Perfect Storm Driving Gold Higher

Gold is at three-month highs.

Investors are snapping up the world’s largest bullion ETF at the fastest pace since 2011.

And so far this year, gold bullion has risen more quickly than commodity indexes, stock averages or bonds.

Why?

Because a perfect storm is gathering to drive the gold market higher. And that storm follows — almost verbatim — the script outlined a year ago by Money and Markets precious metals specialist Larry Edelson.

He warned of war. Now war has begun. And just this week, we saw new conflicts explode on three separate fronts …

In The Ukraine …

A shaky, unilateral ceasefire disintegrated, and almost instantly, a more violent phase of the conflict began.

Pro-Western Government forces launched a barrage of ground assaults against pro-Russian separatists. They hit hard with air bombardments. They shelled enemy positions with heavy artillery. They attacked ferociously with everything they’ve got.

Yet, just a few weeks ago, the entire crisis seemed to be little more than a hodgepodge of protest movements and occasional fistfights. Now, suddenly, it’s all-out war.

Ukrainian President Poroshenko has abandoned peace efforts. Russian President Putin has again warned that he reserves the right to use force to invade. And virtually every other world leader is in a state of paralysis, powerless to alter a chain of events that could ultimately sink Europe or even lead to world war.

I don’t know about you, but I still find this hard to believe.

My grandfather, Louis Yolen, comedian, adventurer, and businessman, was the first of his family to immigrate. As a young man, he came from Ykaterinislav, a small village near Kiev, Ukraine — a heart-warming story retold by Jane Yolen in “And Twelve Chinese Acrobats.”

In the late 19th Century, my grandfather  immigrated to the U.S. from the Ukraine, while my grandmother came from Russia.

In those days — and for generations thereafter — war between the two was as unthinkable as a war between Pennsylvania and New York.

Russians and Ukrainians were family — brothers, spouses, and children.

Ukrainian last names were everywhere in Russia; Russian last names everywhere in the Ukraine.

Even as recently as two years ago, when Elisabeth and I went camping on the Volga River, nothing could have been further from the minds of our Russian hosts.

We were near the southern city of Samara, an aerospace and rocket complex that, during the Soviet era, was largely closed off to Russian citizens — not to mention foreigners.

Nevertheless, when we were there, cold war animosities seemed long gone and buried. If you predicted the U.S. and Russia would soon be on opposite sides of a major conflict, they’d say you’re nuts.

Our host family’s campground on the Volga, near Samara in southern Russia — abundant fresh fish caught under the midnight moon, sunflowers as far as the eye could see, and warm friendship at a time when Putin was still peaceful and the Crimea was still Ukrainian.

Now, the cold war is back with a vengeance.

Except for a diminishing minority, sentiment in the Samara region and all over Russia has suddenly reverted to the same propaganda-driven suspicions of the 1960s, or worse.

Russian military expenditures have grown by leaps and bounds. Russian covert operations are in high gear. Both use cutting edge technology. Meanwhile,

In Japan …

The latest events are also personally shocking to me, perhaps even more so.

Elisabeth and I lived in Tokyo for two years in the late 1970s. We have been back to visit countless times since.

Three years and four months ago, our son, Anthony, who lives in central Tokyo, was the first American to send commentary back to U.S.-based journalists on the Fukushima earthquake. He continues to live and work there today.

My visit to Kyoto, Japan, 1979 — a time when a Japanese army involved in overseas conflict was unthinkable.

But so much has changed between our time in Japan and his.

When we first lived there, Japan’s peace-obsessed constitution was the pride and joy of nearly everyone we knew.

“Never again,” they insisted, “will Japan insert itself into an overseas conflict! Never again will we have a true army! Our constitution forever forbids it.”

Now, however, in response to China’s military build-up and incursions in the region, that once-unshakable promise is on its way to becoming null and void.

This week, Japan’s prime minister Shinzo Abe announced a reinterpretation of the country’s pacifist Constitution, freeing its military to play a more aggressive role for the first time since World War II.

According to the New York Times, “the decision will permit Japan to use its large and technologically advanced armed forces in ways that would have been unthinkable even a decade ago when they were limited to defending the country.”

The U.S. military has actually wanted this kind of change for a long time — to help reduce America’s burden for defending the Pacific region. But in China, on the Korean Peninsula and in every nation invaded by Japan nearly eight decades ago, the reaction is pure outrage.

Most people in the West aren’t paying much attention to this brewing conflict. But I am. China was a major focus of my undergraduate studies at New York University; Japan, the primary focus of my doctorate at Columbia. I have studied the history of the conflict since the 1930s.

So I can tell you flatly: It’s turning ugly. Very ugly.

In Iraq …

You know the story. It’s in the news every day.

The latest?

Prime Minister Nuri al-Maliki has bluntly announced that unifying the country is no longer a priority; that his overriding concern right now is defending his nation — or what’s left of it — from a takeover by the jihadist Islamic State in Iraq and Syria (ISIS).

This means that the White House and Congress now have just two choices, and both are bad: They must either:

(a) abandon Iraq entirely, or …

(b) break their just-announced vow to link military aid to political reform.

Which are they going to choose? It’s obvious they’ve already chosen the latter, and given the urgency of stopping the Jihadists, that’s understandable.

But it puts the U.S. squarely on the Shia side of a deeply sectarian religious war.

In fact, it puts us on the same side as nuclear renegade Iran, the hated Syrian regime and the terrorist Hezbollah.

Strange — and dangerous — bedfellows indeed.

Meanwhile, also this week, Iraq’s parliament met to form a new unity government, and within just 30 minutes, the session collapsed.

But here’s the phenomenon that’s most vexing of all:

Six thousand years ago, in a fabled paradise between two rivers, the Tigris and Euphrates, the history of Western civilization began.

This is where Sumer (the “land of civilized kings”) first emerged.

This is where historian Samuel N. Kramer vows that “no people contributed more to the culture of mankind.”

This is the region of Babylon and Sargon.

This is where Hammurabi, the sixth king of Babylon and the first king of the Babylonian Empire, established the first written codes of law in recorded history.

My first college reading assignment on the cradle of civilization included History Begins at Sumer by Noah Kramer, which chronicles 27 “firsts” in mankind’s recorded history. Unfortunately, that same region is where jihadists are now plotting its death.

And right now, this is also where ISIS is establishing the most extreme renegade state on the planet, vowing to destroy the very civilization and culture that first began there more than six thousand years ago.

Most people would interpret this 6,000-year link — between the cradle of civilization and those who seek its death — as strictly a passing metaphor of history, and I hope they are right.

But setting aside thoughts that span centuries, the more immediate threat is the OTHER force that has played a major role in the fall of civilizations …

Inflation! 

Not coincidentally, in the wake of all these global conflicts, consumer prices have risen at a more rapid pace across most of the world’s largest economies for the third straight month.

That includes North America, South America, Africa and Asia; industrial countries and agricultural countries; advanced nations and emerging markets.  Only Western Europe continues to struggle with the so-called “problem” of “too little” inflation.

The proof: This week, the Paris-based Organization for Economic Cooperation and Development (OECD) said the annual rate of inflation of the Group of 20 leading nations (representing 90% of global economic activity) rose to 3.0%, with some countries already reporting high, double-digit inflation.

What’s more alarming? The fact that no one seems to care. In fact, except in countries where inflation is the highest, the authorities are pursuing policies designed to create MORE inflation — not less.

It’s a perfect storm that can only drive gold prices higher:

Wars drive flight capital to gold.

Wars disable the production and transportation of energy, creating more inflation and more flight to gold.

Wars destroy manufacturing facilities, leading to more shortages, more inflation and even more upward pressure on gold.

Perhaps worst of all, as countries print money to pay war debts, currencies fall and gold goes even higher.

If you want to profit, stand by. Larry is now issuing his landmark gold recommendations, and our entire Money and Markets team is dedicated to helping you protect yourself.

My advice: Don’t wait for the perfect storm to strike. Protect yourself and get ready to profit now, before larger and larger crowds seek to do the same.

Good luck and God bless!

Martin

 

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