OIL @ $200 – GOLD @ $2000

MENA turmoil changes the rules-of-the-game

MENA – the Middle East/North Africa region – once known for its dominant position as oil producer to the world, has been decimated over the past 18 months as it has become the crucible for ‘democratic’ protests ranging from the peaceful to the kamikaze violent.

The protests and civil wars have created unprecedented insecurity and faltering oil supplies, which have not exactly helped some of the ‘new democracies’ in the region. Broken infrastructure and customers looking for alternate supplies have disrupted a system that had been more or less stable for decades.

In many cases, there is no one with whom to negotiate in the ‘new democracies’. The political winners are emerging frustratingly slowly.

China and the US announced their new “energy alliance” in a public attempt to stabilize MENA, and of course their oil supplies.

The US$ 148 oil price back in 2008 was certainly one of the factors driving the global recession. At US$ 200 a barrel it has become the critical factor pushing the global economy to a brand new low.

In an attempt to secure value in the face of falling stock-markets, we now see a flight to gold at a level not seen before. The gold producers are of course benefiting – uncertainty is what the gold price thrives on.

Today gold is expected to cross the US$ 2,000 an ounce threshold and confirm that we have entered a period of economic uncertainty that is totally unprecedented .

It is widely expected that this peak in oil and gold prices will drop sharply as and when the MENA countries stabilize, The current romance for increased investment in alternative energy sources, such as wind and solar, will fade away too as the oil price drops back to 2010 levels.

Warning: Hazardous thinking at work

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