The conflict between Israel and Iran is revealing some startling facts about the financial system.
As Zerohedge noted in an excellent write up of recent developments, Iran struck Israel with multiple missile attacks overnight. As of the time of this writing, there are at least 60 Israelis wounded, 78 Iranians dead, and more than 320 Iranians wounded. We have no idea how this will play out as we cannot claim to be experts on Middle Eastern geopolitics.
What we can note however is how the financial system is reacting to this conflict…
On Friday, the day after the attacks by Israel on Iran, the $USD barely rallied. The greenback did jump on the initial news hitting the wires around 8PM but then traded sideways for the remainder of the session. Looking at the chart, you’d be hard pressed to identify that a potential major global conflict was underway.
This is shocking. Historically, the $USD has rallied hard as a safe haven during geopolitical turmoil, e.g. the $USD rallied 2% on 9/11, as well as when Russia invaded Ukraine. That is NOT happening this time. Instead, the $USD is barely rallying at all.
Of course, one single day of weak $USD action in the face of geopolitical conflict doesn’t necessarily translate to anything major. But when you consider how the $USD acted relative to gold, the story becomes more interesting.
Gold erupted higher on Friday. Denominated in $USD, the precious metal hit new all-time highs. Gold also hit new all-time highs when priced in Yen. And it’s not far from doing so when priced in Euros or Swiss Francs.
See for yourself…
This is, effectively, the financial system signaling A) geopolitical risk B) another round of money printing is coming C) gold is now disconnecting from its historical relationships to the fiat currencies and is becoming a standalone asset.
Regarding that last point it was just revealed that gold has surpassed the Euro as the 2nd most owned reserve asset by global central banks. Put another way, central banks want to own gold more than Yen, Euros, Yuan, or any other currency (save the $USD).
That is a tectonic shift. And as investors, our job is to take note of it and invest accordingly.
On that note, we recently detailed three investments that will profit beautifully from as capital flees fiat currencies for inflation hedges/ non-fiat in a Special Investment Report titled How to Profit From Inflation.
This report explains WHY the $USD is so weak, what it means for the markets, and which investments will perform best in this new environment.
We made 99 copies available to the general public. As I write this, there are only 39 left.
To pick up yours…
Best Regards
Graham Summers, MBA
Chief Market Strategist
Phoenix Capital Research
