Part of the intro section from IKN668, out Sunday evening:
The nuclear option changes the house position on geopolitical risk
In my schooldays it was a real thing. For example, I distinctly recall a couple of my more reactionary teachers telling us all to enjoy life…while it lasted. Thankfully since then, the world has enjoyed a few decades in which phrases such as “nuclear option”, “M.A.D.”, “go ballistic”, “nuclear bunker” “fallout” became allegorical, used as descriptive concepts for far less serious matters. But here we are, as time and again over the last two weeks Vladimir Putin has reached for the “We Got Nukes” phraseology, the threat he knew and knows would freeze adversaries in their paths of retaliation. Strange to think it took just three weeks to get from the end of the Winter Olympics to where we are today, sic transit gloria mundi.
You do not need another long sermon on the evil deeds unfolding in The Ukraine and I will limit myself to reading extensively on the despotic Putin and his motives (real or imagined), rather than joining a throng and writing amateur psychoanalysis on the person. Instead we cut to the chase and remain practical here at the IKN Weekly, shifting our focus to gold and the major shift in our view of geopolitical risk as it affects the metal. My adult life has been one in which (and to quote myself from the last three weeks’ worth of Weeklies) geopolitical events do not affect the price of gold, not in the long-term anyway. However, the Ukraine war is no petty border dispute any longer, it has caused a seismic shift in the way the world’s financial system works and yes, that matters. This major shift since February 2022 has nuclear weapons as its cleavage point, it’s the first time in decades they have been used as a threat, not merely a deterrent, by a country wishing to force its philosophy on others. That means the world has really changed and really for the worse. Gold will become more expensive as a result.
Nukes are the ultimate threat and we have all seen the chilling effect of Putin’s carefully considered strategy. The Free World has responded in the ways it can, with heavy duty weaponry of sanctions of the like we’ve never seen before. The recoil of “money” (in its most general term) from Russia has changed the course of the way we all do business and, while I can still defend the position of how gold does not make you rich (instead it stops you from becoming poor) in this new financial world, it’s now clear the world’s attitude toward gold ownership is changing rapidly. This time last week we watched the gold price bounce up and down on the U$1,900/oz line but, as the impact and consequences of the Western world’s financial recoil from Russia rolled out, gold started getting bid up in an altogether different way:
(charts and comment, then the conclusion)
Gold is going higher and considering the circumstances, that’s a rather unfortunate thing to say.