By Gold Core
03 January 2018
Last Saturday was the 75th anniversary of the Chicago Pile experiment. The experiment that proved for the first time that an atomic bomb could exist. The experiment was a key step in the Manhattan Project that went onto develop the infamous bomb in World War II.
The timing of the anniversary could not be more apt. The results of the experiment not only resulted in devastation at the end of the Second World War but also changed science and turned the nature of war on its head.
Today the world feels very much on the brink of something huge about to be detonated. It might be a nuclear weapon from North Korea, it could be the grenade that Trump has just thrown into the Middle East peace protest or it might be a subtle economic disaster courtesy of Brexit. It might be all three.
The truth is we just don’t know. It is this uncertainty that is making so many investors and savers nervous. There is almost a euphoria to the panic – see the bitcoin price by way of example or stock market performances. But there is also an underlying air of calm and understanding. Gold investment is climbing whilst Google searches for ‘buy gold’ peaked last month.
Trump is ‘declaring war against 1.5 billion Muslims’
No matter your thoughts on Trump’s decision to recognise Jerusalem as Israel’s capital, it cannot be denied that it is a contentious one. The city is arguably the most important aspect of the entire Palestine question.
Trump’s decision has reversed decades of US policy and brought with it a raft of criticism from US allies as well as the Arab and Muslim world.
President Mahmoud Abbas said the decision was tantamount to the United States “abdicating its role as a peace mediator”.
A spokesman for Hamas said the decision would “open the gates of hell on US interests in the region”.
Saudi Arabian media say King Salman told Mr Trump by telephone on Tuesday that the relocation of the embassy or recognition of Jerusalem as Israel’s capital “would constitute a flagrant provocation of Muslims, all over the world”.
His views were echoed by President Abdul Fattah al-Sisi of Egypt, who warned against “complicating the situation in the region by introducing measures that would undermine chances for peace in the Middle East”.
And this is seen as a declaration of war:
the Palestinian delegate to the United Kingdom said on Wednesday that President Trump’s move to recognize Jerusalem as the capital of Israel signals “a declaration of war” in the region. “He is declaring war in the Middle East, he is declaring war against 1.5 billion Muslims, hundreds of millions of Christians that are not going to accept the holy shrines to be totally under the hegemony of Israel,” Manuel Hassassian told BBC 4 Radio’s “Today.”
Trump argued that this is a ” long overdue step to advance the peace process and work towards a lasting agreement”. Allies and others swiftly disagreed with some suggestions that this is not about peace but entirely politically strategic.
The 1997 film Wag The Dog has become shorthand for Presidents using diversionary tactics. For example, in 1998 Clinton launched air-strikes on Afghanistan and Sudan just days after a Grand Jury hearing into his conduct with Miss Monica Lewinsky.
Today we may be seeing a similar approach from President Trump. After all, Trump’s Israel announcement comes immediately after his former National-Security Adviser Michael Flynn pleaded guilty and agreed to cooperate with the FBI.
We could also be seeing an attempt by Trump to stir up Muslim violence as a political tool. This would not be surprising given a large chunk of his campaign was about using so-called Muslim barbarism as a political strategy. This latest announcement is a provocation.
We have seen in the past how long and expensive campaigns in the Middle East can go on for. The disruption they cause and the vast expense they bring. The United States is unlikely to suddenly turn its back on its primary allies in the region – Israel and Saudi Arabia – a conflict in itself. Therefore one should expect more violence and increased involvement by Trump in the war zone that is just getting started.
Elsewhere in the world…nuclear bombs
Trump has form when it comes to provoking hotbeds of tension. His most recent head-to-head was of course with North Korea.
This year has been one of great progress for the country, with 23 reported missile tests. Each one making new ground and some even breaking into forbidden airspace.
China has been vital when it comes to preventing the despot that is Kim-Jong Un from going literally nuclear on the US. However it seems that perhaps they are even getting quite nervous.
According to Business Insider a Chinese newspaper based next to North Korea has published a full-page guide on how to deal with a nuclear attack.
Whilst it was later explained that this was not about North Korea but instead just an educational guidance on nuclear weapons, one has to wonder what provoked such a reaction.
Is the next financial crisis around the corner?
Much of the world is likely bored by Trump’s ongoing sabre-rattling. Here in the UK we have other pressing issues to deal with. Many of which are becoming the new definition of uncertainty – how do you handle a problem like Brexit?
We are barely over the 2008 financial crisis. It rather feels like we keep sweeping the results of it under the carpet and now we’re stepping over rather large, often non-negotiable mounds. But there is now something else which could cause as far-reaching consequences.
David Davis, Brexit Minister, told MPs this week that his department had failed to carry out a qualitative assessment of the Brexit impact because it was simply impossible.
He explained that as with the financial crisis, the economic rule book will in all likelihood go out the window should Brexit happen:
“It will have an effect, the assessment of that effect is not as straightforward as people imagine.
“I’m not a fan of economic models because they have all proven wrong. When you have a paradigm change – as happened in 2008 with the financial crisis – all the models were wrong”
This explanation comes as Prime Minister Theresa May has just about managed to get a handle on Brexit negotiations. The situation has been so uncertain that businesses are being forced to take protective measures against the worst possible outcomes.
Senior executives in the financial services sector, which accounts for about 12 percent of the economy, told Reuters May’s efforts to secure a transition deal had come too late and they had no choice but to start restructuring.
The uncertainty is particularly painful for the manufacturing sector as low margins make it risky for them to restructure unless it is essential. They have been holding off on investment but are preparing for new certification that would allow them to sell in Europe if there is no deal.
“The delay is so great and the uncertainty is so great that companies have no choice but to start triggering their plans,” the head of one of Britain’s largest companies said.
Uncertainty should lead to certainty about gold investment
Every week there are stories of politicians screwing up one way or another. Granted, this week feels particularly bad. But in truth there were always going to be problems with Brexit, North Korea was always going to be testing nuclear weapons and the Middle East was a bubbling cauldron waiting to have the heat turned up.
The outcome (for now) remains the same: we don’t know how this will end. Whilst the future might seem uncertain but the ways in which we can protect ourselves are anything but. Gold and silver act as both financial insurance and portfolio diversifiers.
Last month holdings in gold ETFs increased and more people showed an interest in gold investment. This suggests that savers are no longer concerned about the low, opportunity cost of holding gold. Instead they are realising that the uncertainty we see across the globe is not because of one event such as a bad negotiation or announcement, instead it is the general air of uncertainty and concern as to how this will pan out.
Those looking to insure their portfolio against global events should ignore the day-to-day reports and instead prepare for these guaranteed uncertain times by diversifying and owning gold and silver. For many years, gold and silver have protected investors and savers from uncertainty, both economic and geopolitical.
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This article was originally published at Gold Core.