Gold consolidating in $900-1000/oz range

Looking at the gold chart its apparent that the gold price is consolidating in the $900-1000/0z range. One can likely expect a base in the next few weeks before moving higher. A move to $1000/oz would suggest a new leg, a convincing break above $1034/oz would confirm it. Regardless its only a matter of time.

Bank bailouts, Iran missile issues, rising inflation will help gold, plus the likely weakness in gold. You might expect some attraction to gold in times of uncertainty, but in this case, I suggest the burden of another 'open-ended' commitment to war in the Middle East might actually shake the USD somewhat.

What will Obama mean to a US conflict with Iran? I dare say that it will mean an extra 1-2 months of appeasement. But Obama will have better fortune getting NATO members on-board. So how far do I think this will go? Iran is engaging in self-righteous chest beating. I think any US action will involve missile attacks on Iran's nuclear infrastructure as well as a takeover of its oil infrastructure. I expect the surprising support for this would come from countries like Japan, which depend on Iran oil, though of course they would never say publicly. The timing for this conflict is interesting. Will Bush commit the US to military action in Iran before a presidential election. I'm not sure of the emergence power provisions in the USA, but I guess the President can suspend any scheduled election in the case of war. One would not expect however Iran to prompt that, but I really don't expect them to be so strategic. But its possible. I think the Democrats would love the Republicans to start the conflict. The US would of course act decisively to gain control of the oil infrastructure. Which means knocking out Iranian air support. I guess Russia has made a lot of money in recent years equipping Iran. Kind of interesting how Russia is no longer the enemy, but its supplies enemies of the USA. Russia gains either way - from weapons supplies or a rebuff to US influence in the region.
If the USA were about to invade Iran you would expect them to encourage Saudi, Russia and other OPEC states to increase oil supplies. We have seen this already. The good news is that a conflict would surely decrease consumer confidence, which would reduce global oil demand. That will not happen overnight, but most countries can store a maximum of 90-days of oil supplies.

But what if this is all chest beating? The Iranian president is among the most unpopular presidents in history. He isn't getting much support for his presidency, mostly because of his poor efforts to improve the Iranian economy. Do Iranians want a fight with the USA. Hardly. In fact they are probably looking more favourably on US efforts in neighbouring countries. Iranian intellectuals are likely wondering whether US intervention will deliver democracy to them. Well good luck with that. Democracy is just a tool for delivering control to diplomatic fascists, which is what they have now. Though one must concede the US-style is so much more palitable, and of course consonant with the Western-lead paradigm. What a pity Iran could not mount an intellectual argument for its opposition to the USA. It would be great if there were such a country. Unfortunately there are only rogue collectivist states. Fascists opposing fascists.

I recall when the Iranian president was elected he was labelled a 'pragmatic reformer'. The reality has been quite the contrary. I guess its all relative. One might ask - if he is pragmatic - might he engage in war-mongering to encourage US intervention. There is no question they hate the USA, but its just possible they hate the controls of the Iranian religious clerics more. Iran needs a revolution since the clerics have authority to override the parliament.

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Andrew Sheldon www.sheldonthinks.com

Gold testing $910/oz

The gold price is testing the $910/0z level. Gold punters will be looking to see if it holds its current uptrend, which despite breaking the previous high, might still remain in a channel. The weekly and monthly chart suggest that gold could fall back as low as $900/oz and still remain in its uptrend.
On the upside we are looking for gold to break convincingly above $950/oz before we might expect it to rally. These decisions usually hang on the wire...all the more reason before the general market sentiment is poor, so I do expect gold will test that $900/oz level, and tread water for a litlte time before it has another rally.

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Andrew Sheldon www.sheldonthinks.com