Over the weekend, you saw what was called a massive anti-corruption political purge occur in Saudi Arabia. In what has been the biggest political shake down in the Kingdom in decades, current and former ministers and princes alike were fired or jailed as the Crown Prince moved to root out corruption and remove perceived threats to his power base. Oil prices have reacted significantly to this and other ongoing geopolitical chaos over the weekend (as well as past several weeks).
It is geopolitical instability like this¬†around the globe that threatens your investment and retirement portfolios. The world order is under the greatest attack since the end of World War II as Secretary of Defense General Mattis opined in his confirmation hearings. The answer to protecting your retirement portfolio from this danger is the world’s longest and best historically proven asset gold. This is why you need to understand how to invest in gold and to know about gold IRA rollover rules and regulations.
Saudi Purging of Princes and Ministers Stuns Global Energy Markets
When the leading Saudi figure the Crown Prince Mohammad bin Salman began arresting important figures throughout the country’s government, the crackdown and arrests were originally framed as an anti-corruption drive throughout the kingdom. One of the leading figures taken as part of the purge was the previous head of the National Guard Prince Miteb bin Abdullah.
Analysts have since reconsidered that the crackdown and¬†arrests of a number of the ministers and princes this past weekend may have been more about the Crown Prince consolidating his hold on power. The impacts on oil prices were dramatic in either case. Prices for the futures of crude oil shot to highs not seen since the middle of the year 2015 early Monday. The exceeded $64 per barrel of Brent crude and more than $57 for American U.S. West Texas Intermediate crude oil benchmarks.
But more is going on here than you might realize. Oil prices have been low for three full years now. The Saudi government has spent its once-massive budget surpluses in this time. Now they require oil-based revenues and growth for the crown prince and his ambitious plans to survive, per energy trading head of Seaport Global Securities Roberto Friedlander. As a result of this, he said about future oil prices:
“The Saudi Situation means $70 before $50. The Saudis can’t afford a renewed decline in prices or a decline in oil revenues. They would certainly prefer to risk tightening the oil market too much and see prices hit $70, rather than risk letting them slip back to $50.”
This is because Bin Salman the presumed future king is working towards radically changing the economy of Saudi Arabia. The plan is called Vision 2030.¬ It involves the sale of a significant stake in Saudi Aramco the state oil company that in 2016 was the largest oil producing firm in the world. To help bolster oil prices so as to improve this sale in the company, the Saudis are leading OPEC and non-OPEC exporting nations to reduce the world supplies of crude oil.
This will help to drive¬†prices higher because of supply and demand factors. Yet analysts have also suggested that it is not only the Saudi purge and ambitious plans that have given legs to the oil rally. Geopolitical¬†events are boosting the energy market throughout the Middle Eastern region and beyond.
Nigeria Signs On to OPEC Output Cuts as Rebels Threaten Nigerian Installations
Some of the geopolitical black swans threatening oil production and increasing prices are based in Africa as well. Nigeria is a key energy producer that had so far not joined up with the other OPEC nations on their oil cuts. Yet on Monday the oil minister from Nigeria hinted that they are potentially prepared to make a contribution to the oil cuts.
It will help OPEC in their quest to withhold 1.8 million barrels of oil per day from the energy market for 2017 to reduce the stockpiles of worldwide oil that have built up in recent years. In the past, Nigeria had secured an exemption from these cuts because of the problems that plagued their oil exports.
Nigeria has suffered from rebel terrorist attacks throughout the year. This has managed to keep the majority of their oil exports from reaching the market last year. This graph shows how violence has marred their export efforts in the past:
These threats to Nigerian oil just reappeared though. This past Friday November 3rd, the Niger Delta Avengers cancelled a ceasefire agreement they had signed with the government. They were the ones responsible for sabotaging the Nigerian’s energy installations. It seems very possible that additional cuts could be forced on them in the near future.
Lebanese Prime Minister Resigns Under Foreign Pressure
At the end of last week you also saw the political stability deteriorate in Lebanon. The Prime Minister Saad al-Harri resigned under pressure from foreign influence. He referred to Iranian efforts that were destabilizing his country as his reasons.
It represents yet another flash point in the Middle East and world. Though Lebanon is not a significant oil producer, the fact that it reveals still more tensions between regional rivals Iran and Saudi Arabia are rapidly growing is also worrying oil markets.
Iraqi Conflict in Kurdish Regions Affected Prices
Over the last several weeks, another factor that has been driving oil prices has been blamed on the sometimes armed conflict between the Iraqi central government and the Iraqi Kurdistan region in the north. After the Kurds held a referendum in favor of independence, Iraq retaliated against them to punish them, as did their neighbors in Turkey.
The Iraqi army moved in and seized the oil regional city of Kirkuk which the Kurds had held since they drove out ISIS a few years ago. Supplies of this oil have also been disrupted¬†over the last few weeks.
Iranian Nuclear Agreement Not Re-certified Spooked Oil Markets
American President Donald Trump recently decided not to re-certify the P5+1 (United Nations Security Council Members U.S., Britain, Russia, France, and China plus Germany) nuclear deal with Iran. Oil markets consider that a potential risk to the Iranian oil exports that have only recently come back on to global energy markets in the last year. It increases the possibility that their oil output sales will be diminished in the future.
Gold Often Rises In Tandem with Higher Oil Prices
All of these different geo-politically destabilizing events are working together in concert to push global oil prices considerably higher. By itself this is bullish for gold, which tends to go higher alongside the “black gold” of oil. Besides this though, the various flash points around Africa and the Middle East are also potential “Black Swan” events that could tip significantly overbought stock markets into a long overdue correction or even downturn if they escalate suddenly.
This is why you have to insure your retirement accounts with gold (and other precious metals). Gold is the historically proven safe haven of choice when events unsettle the various global markets. All of these scenarios together explain why you need a Gold IRA. If you need more, here are another at least five reasons not to sell your gold. You should take some time to learn what gold goes in an IRA. Once some of these potentially hazardous scenarios¬†worsen, it will be too late to buy the yellow metal for an affordable price.