LAWRIE WILLIAMS: Gold and silver dive as Iranian tensions ease

The U.S. and Iran seem to have pulled back from the brink as far as serious escalation of the two countries’ military options are concerned and gold and silver prices have dived accordingly.  The oil price has eased too.  Asian and European equities also seem to have breathed a sigh of relief and we’d anticipate U.S. equities following suit later today unless some new tension increasing developments arise in the meantime.

The Iranian missile response to the U.S. assassination of General Qasem Soleimani was both well warned 24 hours in advance and would have allowed U.S. and allied forces targeted to take precautions thus minimising casualties, but also gave Iran the chance to show that the U.S.’s Iraqi bases, and presumably its naval vessels, would be totally vulnerable to Iranian missile strikes.  Whether this was enough to satisfy the Iranian people’s calls for revenge over the Soleimani killing is perhaps doubtful though and tensions, although reduced, remain at a high level.  The U.S. may well have thus lost any tacit support it had in the region laying its military open to perhaps unsanctioned attacks by militias and other armed groups, allowing the Iranian leadership to claim non-involvement in such likely developments.  It was perhaps no coincidence that the IS-supporting Al Shabab launched a raid on American assets in Kenya immediately after the Soleimani event in which three Americans were killed!  Such proxy attacks aimed primarily at Americans , for which Iran can claim zero involvement, could well increase.

As for the gold price it fell back from close to the $1,600 level yesterday to settle below $1,550 and then recovered to just above that level in Europe.  Silver also fell back to below $18 again.  The big question facing the gold investor is whether the precious metals will find a new floor at this kind of level, fall further, or yet put on a few dollars again.  We suspect further falls may occur but these may well be temporary in nature until tensions between the U.S. and Iran flare up again, as they surely will given the inherently hostile positions taken by the U.S. and Iranian leaderships.  Neither side seems to want a full scale war, but the U.S. may have opened up a Pandora’s Box in stimulating raised anti-American feelings throughout this hugely volatile region.  Martyrdom seems to be an integral part of the psyche of some Muslim adherents, so there could well be attacks on American military personnel and their allies whatever the odds against their success.

The whole situation may have been complicated by the fatal crash of a Ukrainian airliner shortly after take-off from Tehran airport.  The event seems to have involved a catastrophic failure of the Boeing 737 800 leading to speculation the plane may have been shot down or there was a bomb on board.  The event happened about 4 hours after the Iranian missile strikes on the U.S. airbases. 

So far the Iranians seem to have been reluctant to allow Boeing or U.S. involvement in the crash analysis leading to speculation in the U.S. media that the crash may have resulted from the misfiring of an Iranian missile defence system –however it could be that Iran suspects U.S. involvement and wouldn’t want any evidence thereof tampered with!  In the Iranian mind the U.S. has the track record of shooting down an Iranian civilian airliner in 1988 killing 290. It might thus seem that a bomb, or an Iranian misfired missile, would  be the most likely culprits for such a catastrophic occurrence, but other options shouldn’t be ruled out.  Iran has said it will involve non-Iranian investigators and the lack of U.S. involvement may be a purely political move given the enmity between the two countries.

09 Jan 2020

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London - recently described as the World’s No. 2 University (after MIT).

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