MAIN TOPICS
 Gold prices up on escalating tensions in
Yemen.
 U.S. GDP disappoints markets.
 Greek bank deposits plunge.
 China backed AIIA garners support.
30 March 2015
The price of gold experienced its longest winning streak since 2012, last week as the price broke through the $1,200
level early Thursday and soared as high as $1,220 as Saudi Arabia launched airstrikes against Iran-backed Shiite
militants in Yemen.
New geopolitical tensions push gold price higher.
Although new geopolitical tensions in the oil-rich region prompted some safe-haven buying of gold, gold pared gains
after hitting a 3-1/2-week high on Thursday. The jump in the price was due to a knee-jerk reaction to escalating
tensions in the Middle East. The price of the yellow metal settled at $1198.40 per ounce, a hair below $1200 an
ounce.
Stock markets worldwide fell and oil prices jumped after Saudi Arabia and its allies conducted air strikes
in Yemen that fuelled worries Middle East energy shipments may be put at risk.
Although Yemen is an impoverished country, it is strategically important and this crisis could have serious
implications for the region and the security of the West.
The main fight is between forces loyal to the beleaguered President, Abdrabbuh Mansour Hadi, and those allied to
Zaidi Shia rebels known as Houthis, who forced Mr Hadi to flee the capital Sanaa in February.
Escalating tensions in Yemen can greatly exacerbate regional tensions. It is also of much concern to the West
because of the threat of attacks emanating from the country as it becomes more unstable.
The conflict between the Houthis and the elected government is also seen as part of a regional power struggle
between Shia-ruled Iran and Sunni-ruled Saudi Arabia, which shares a long border with Yemen.
Gulf Arab states have accused Iran of backing the Houthis financially and militarily, though Iran has denied this, and
they are themselves backers of President Hadi.
Yemen is strategically important because it sits on the Bab al-Mandab strait, a narrow waterway linking the Red Sea
with the Gulf of Aden, through which much of the world's oil shipments pass. Egypt and Saudi Arabia fear a Houthi
takeover would threaten free passage through the strait.
Last Wednesday, the price of gold fell just short of the psychologically important $1,200 level after another weak
U.S. durable-goods order cast doubt on the Federal Reserve’s ability to raise interest rates soon. “The numbers
offer further evidence of an uneven U.S. economic recovery, lending credence to those who believe the Fed will need
to wait longer than previously expected to raise interest rates,” The Wall Street Journal reported. “That is good news
for gold.”
On Friday, the U.S. Department of Commerce reported that U.S. GDP ended 2014 slightly weaker than economists
were expecting.
The report is a final revision of the fourth-quarter growth figures, based on the most complete data. The figures
surprised many economists who had predicted slightly higher growth for those three months.
The report showed that the gross domestic product (GDP) expanded at a 2.2% annual rate for all of 2014.
The GDP figure is the broadest measure of economic health and tracks all the goods and services produced in the
nation.
A separate report showed consumer sentiment slipped in March, adding to signs that the moderate pace of economic
expansion persisted through the first quarter.
The University of Michigan said its consumer sentiment index fell to 93 this month from a reading of 95.4 in
February.
Meanwhile, the Greek financial crisis continues. Over the weekend, Greece's international creditors spent time
mulling over a series of reform measures in order to decide whether to finally release vital funds to Greece to
prevent declaring bankruptcy.
Having submitted their plans on Friday night, the government is now hoping Europe's paymasters will finally give
their assent to unlock €7.2 billion in bail-out cash Greece desperately needs to stay afloat.
Athens' anti-austerity government is planning to raise €3bn from measures including raising levies on alcohol and
cigarettes, clamping down on tax evasion, and continuing with a controversial series of privatisations.
Greek Prime Minister Alexis Tsipras has insisted his government will not carry out any recessionary measures to cut
wages, jobs, or pensions.
During February, Greek bank deposits plunged to their lowest level in 10 years.
The deposits of households and businesses fell 5% in February to 140.5 billion euros ($154 billion), their lowest level
since March 2005, according data released by the Bank of Greece on Thursday. Greeks have pulled about 23.8 billion
euros from banking system in the past three months, 15% of the total deposit base.
More countries support the China led AIIA.
Now it's Austria, Switzerland, and Australia that have joined dozens of other countries around the world in the antidollar alliance.
Recently, prime-minister Tony Abbott announced Australia would sign a memorandum of understanding that will
allow Australia to be involved in negotiations to set up the $100 billion in the Asian Infrastructure Investment Bank
(AIIA).
The United States has lobbied Australia and its other allies against signing up to the bank for fear it would dilute the
influence of the World Bank and the Asian Development Bank, in which it and Japan hold dominant positions.
To-date Britain, Germany, France and Italy have all declared their support for the China-led AIIB. They join more
than 30 other countries that have either signed up or applied as founding members so far.
The AIIB is the biggest disruption to the global monetary system since the end of World War II.
For decades, global finance has been completely dominated by the United States... and the US dollar. Nearly every
major financial or commodity contract in the world is priced in US dollars. And this requires that the entire world not
only holds US dollars in order to engage in trade, but to also use the US banking system.
But in recent years, we’ve started to see a shift away from this. The BRICS – along with a handful of other developed
and developing economies – have opted to settle foreign transactions through bilateral trade
agreements. Sometimes they’ve even opted to pay for each other’s goods with gold.
Iran is one of the latest to join the list of countries ditching the dollar. Just last week, their central bank announced
that the U.S. dollar will no longer be used for trading purposes. Instead, Iran will trade in currencies such as the
Chinese yuan, euro, Turkish lira, Russian rouble and South Korean won.
The dollar being the reserve currency of the world has put the United States in a position of unparalleled privilege.
And in return, this privilege has afforded the United States the opportunity to indebt itself more than any other
nation in the history of the world.
Anyone with the ability to think can see that the debt levels are so massive, it's now mathematically impossible for
the US to ever pay it off.
And as the U.S. continues to place sanctions on nations all around the world – like Iran and Russia – just when they
don’t agree with the U.S., these threatened countries will find an alternative currency with their partners by
bypassing the dollar system.
It is now apparent that many other nations have had enough and no longer want to be dictated to by the U.S. And
they're joining with China's new AIIB in a clear sign of alignment against the US government and the US dollar.
China’s intention is not to destroy the current financial system but to seek a greater role for it in the decision-making
and running of the institutions such as World Bank and IMF. China hopes to force a rethink on the part of the US as
regards the IMF (ie, expand and reform the institution, accommodate the renminbi and so on).
There are indications that the inclusion of the Chinese yuan in the International Monetary Fund's "special drawing
rights" basket will be connected to China's announcement of a substantial increase in its gold reserves.
In an environment of market rigging, low interest rates and massive money printing, be assured that the values of
global fiat currencies are going to decline rapidly. It is no wonder why countries such as China are accumulating
massive amounts of gold. And, whether or not you believe a financial collapse is imminent it would be very prudent
to buy some physical gold.
TECHNICAL ANALYSIS
The recent rally in the gold price has been capped at around $1200/oz. It seems that prices may correct slightly
before resuming their up-trend.
About the author: David Levenstein is an independent precious metals market commentator with more than 30 years’ experience.
© 2013 all rights reserved.
Information contained herein has been obtained from sources believed to be reliable, but its accuracy cannot be guaranteed.
Any opinions expressed herein reflect judgements at this date and are subject to change without notice.