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Why Now Is The Best Time To Invest In Gold

June 18th, 2014

gold timeGeorge Leong: Gold and oil are finally seeing some upward lift, but it has more to do with the geopolitical landscape than inflation and economic growth.

As I said in recent weeks, the price of gold could be headed higher, but only if we see a rise in geopolitical tensions. That’s what we are witnessing at this time, so there could be quick money to be made.

While the Ukraine situation appeared to be settling down, the destruction of a Ukrainian aircraft with soldiers on board will not help the already tense situation. Russia has also halted the flow of oil into Ukraine after failing to reach a compromise on only owing for past oil and the price for future oil. This failure could cause a bottleneck not only in Ukraine, but also in Poland and other European countries that depend on Russian oil. Of course, in the worst-case situation, this could impact growth in the eurozone at this critical time when the region is still fragile, with high unemployment and mixed economic renewal.

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We also have the massive uprising in volatile Iraq, where the brutal ISIS (the Islamic State in Iraq and al-Sham) rebel militia is spreading its control in the country, now marching on Baghdad. The negative implications of ISIS increasing its control over the country could wreak havoc not only on the oil production out of Iraq, but it could also create geopolitical instability in this already volatile region that also includes tensions on Syria and Iran.

The two events will likely drive safe haven buying in gold, which has been moving higher after bouncing off some support around $1,250 an ounce. If ISIS expansion goes unabated and the violence escalates in Iraq, we could easily see gold prices skyrocket above $1,300, based on my technical analysis.

Gold - Spot Price (EOD) Chart

Chart courtesy of www.StockCharts.com

In addition, oil prices will also ratchet higher if the flow from Iraq is impacted.

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