Tensions in the GeoPolitical System Increase Gold’s Appeal
As wars, economic crises, and other forms of geopolitical unrest hit the world, most people are devastated but not gold investors. If anything, such calamities are all favorites among gold investors. Not because they are atrocious, but because they want to see their metal appreciate in value.
Investors, like all other people, are terrified of civil wars, border conflicts, and terrorist attacks. This prompts them to place their money in safe havens like gold and reliable government debt, the most popular being US Treasuries. And they are shrewd in doing so. How so?
Looking at the past, Gold has proven to appreciate in value amidst global tragedy. A perfect example of this is the period between 1970 and 1980, a time when there was a series of upheavals in the Middle East. Some calamities included the Soviet invasion of Afghanistan, the Iran-Iraq War, and the Iranian Revolution.
Consequently, gold surged in value by 23 percent in 1977, 37 percent in 1978, and a whopping 126 percent in 1979, the year of the Iranian hostage crisis! That’s not all. After the United States launched bombs in Libya in 1986, gold soared in value. This happened shortly after the Gulf War in 1990, and when ISIS attacks threatened Middle Eastern oil supply
Even in the 21st century, history repeats itself. In September 2020, gold hit a new high of $2,034 per ounce, owing to fears of the coronavirus spreading and wreaking havoc on the economy.
Fortunately for savvy investors there is an option to benefit from this trouble and to do so in a tax efficient manner with a gold IRA. A gold IRA is a tax deferred savings account that allows you to hold precious metals. While there are many companies that can help you set up a gold IRA, there is one that is better than the rest and that is Blanchard Gold. To understand how you can benefit from rising gold prices from political chaos, read this Blanchard Gold review. Alright, now back to the article.
Besides COVID-19, there are many hot spots across the world today that might quickly erupt into a conflagration that grows into a shooting war or even the dreaded scenario of missiles being launched.
Notable ones include a migrant crisis in Belarus, which Ukrainian officials believe is a tactic devised by Russia to stage a Ukrainian invasion. This replicates what happened in 2014 when Russian forces annexed Crimea. Others are tensions between the US, China, and its neighbors over Taiwan; and finally, the threat of a war between North and South Korea, which would naturally draw in the US.
Here’s a formula for starting a war with a high chance of success: send thousands of migrants to your border, push them into the neighboring country, then fire warning shots as your neighbor’s forces try to keep the migrants out of their nation. In such a stressful circumstance, soldiers from the opposing countries may mistake the shots and shoot back, resulting in a war.
Unfortunately, such an accidental clash is now a real possibility on Belarus’s border with Poland. What will NATO’s response be if this occurs? As fears grow that Russia is ready to attack Ukraine, the subject has baffled the US and other NATO members. Following war games in western Russia earlier this year, officials claim Moscow has retained approximately 90,000 troops in the area.
Volodymyr Zelensky, Ukraine’s president claimed that his country’s intelligence service had discovered plans for a Russian-backed coup, an allegation Moscow rejects. Denys Shmygal, Ukraine’s prime minister reiterated the situation at hand by saying that a Russian military build-up on Ukraine’s border, the second since May, was part of a larger Russian campaign to derail Ukraine’s progress toward EU membership.
How did it all start? The problem began some weeks ago when Belarus began flying in Middle Eastern migrants to the capital, Minsk. They transported the migrants to the border, where they have been attempting to enter neighboring counties like Poland, Lithuania, and Latvia, while living in appalling conditions.
On November 9, the Polish Ministry of Defense published a video showing 3,000 to 4,000 migrants camped on the Belarusian side of the border fence, waiting to cross into Poland, which is a member of the European Union. After video footage, the day before showed migrants cutting razor wire and attempting to climb over walls. In response, border guards and Polish police were outfitted with anti-riot gear.
As if that’s not enough, the military is also involved in the situation. Belarusian soldiers threatened to fire on Polish forces but instead fired blanks following the incident. Soldiers from Poland retaliated by firing into the air. Consider that Belarus’s long-serving president, Aleksandr Lukashenko, is a close ally of Russia and appears to relish challenging NATO.
Russia and Belarus declared on November 11 that they will begin combat alert patrols along their borders with Ukraine, Poland, Lithuania, and Latvia. On the same day, Russian nuclear bombers flew over Belarusian airspace on a monitoring mission.
Ukraine is said to have sent 8,500 troops to the Belarusian border in preparation for a confrontation with Russia. Even though Russia invaded Ukraine and annexed the Crimean peninsula nearly eight years ago, we must remember that the battle is far from done.
Russian backed a separatist conflict that erupted in Eastern Ukraine weeks after Ukraine’s Moscow-friendly president was thrown from power by huge demonstrations in 2014. According to ABC News, more than 14,000 people have perished in the conflict, which has ravaged Ukraine’s eastern industrial heartland known as Donbas for seven years.
Luckily, large-scale conflicts ceased, all thanks to a 2015 peace accord signed by France and Germany, but efforts to reach a political settlement have failed, and isolated clashes have occurred along the sensitive line of contact. Moreover, Russia has turned down recent offers to meet with France and Germany.
Russia, unsurprisingly, sees the situation through a different lens, accusing NATO of behaving forcefully in Moscow’s backyard. According to Reuters, Putin reportedly outlined out Russia’s “red lines” on Ukraine, saying that if NATO put powerful missile systems on its neighbor’s soil, Russia would be forced to respond. Recent NATO drills with nuclear-capable aircraft flew as near as 20 kilometers from the Russian border.
The country asserts its right to station troops anywhere it wants on its own soil. According to a report by the Council on Foreign Relations, Ukraine is critical to Putin’s plans to revive the old empire and provide “strategic depth” against Western invasion.
Defense One, on the other hand, claims that Russia is unlikely to invade and occupy Ukraine, noting the fact that Kiev now has a capable military and that Russia does not desire another costly guerilla war like Afghanistan in the 1980s.
Note that the only countries invaded by Putin are Ukraine and Georgia, both of which are non-NATO members. Ukraine’s pro-Western President Zelensky has attempted but failed, to persuade NATO to include Ukraine. Most members, including the United States, do not want to expand the alliance into a country that is embroiled in a conflict with Russia for fear of being sucked into the conflict.
In terms of what the US, as the unofficial NATO leader and a Ukraine ally, can do to assist Ukraine without providing an Article V guarantee, the country has continued to send military aid ($2.5 billion) since 2014. According to the Council on Foreign Relations, the US should use economic power as well, by reimposing sanctions on the recently built Nord Stream 2 natural gas pipeline.
The Biden administration removed sanctions on the business developing the pipeline that will transport gas from Russia beneath the Baltic Sea to Germany earlier this year, deeming the project a done deal.