Issue link: http://resourceworld.uberflip.com/i/638235
20 www.resourceworld.com f e b r u a r y / m a r c h 2 0 1 6 s p e c u l a t i o n s L e o n a r d M e l m a n W hen we look at past, major, pre- cious metals bull markets, we can identify several psychological components. These might include concern regarding excess currency creation, antici- pation of rampant inflation plus runaway interest rates – and one other factor of note which might be called "the fear equation." It is this last one which is clearly of growing present and future concern. The fear equation itself can take on sev- eral different forms but at present I would suggest the most glaring is the subject of international terrorism. One look at the roster of tragedies which have occurred in recent months suggests that this is no ordinary or minor problem, but one which indeed has the capacity to upset world social and economic stabil- ity. If that is truly the case, then we could easily see a move into gold and silver for causes similar to those which occurred in the late 1970s with the Afghani war which, at least for that moment, threatened to draw the United States and the Soviet Union into direct conflict with unknow- able consequences. Just since the beginning of 2016, the world has witnessed the following Islamic terrorist events: January 1, when immigrant rioting took place in Cologne, Germany; suicide bomb- ers kill 10 on January 12 in Istanbul; two female Islamic suicide bombers kill 10 in Cameroon (following other fatal attacks in September and December in that country); and Al Qaeda partisans attack a hotel in Burkina Faso killing 29 including seven Canadians on January 16. It should be noted that all of these attacks followed the world attention-grabbing massacres in Paris in November and San Bernardino in December. I believe that it is more than reasonable to conclude that the frequency and sever- ity of these attacks cannot help but serve to raise the worldwide level of fear regard- ing our own personal safety. Another massive problem without either quick or apparent resolution is the massive influx of Islamic refugees from the Middle East and North Africa now descending on Europe. While virtually all Europeans want to offer a helping hand, the scope of the associated problems is cre- ating genuine difficulties. First, the sheer number of refugees has proven to be beyond the scope of normal government social service operations. According to an Associated Press article, in November, the total number of refugees expected during the next year is about 3,000,000, a number which virtually pro- hibits any effective security screening. It is also a number far in excess of the abil- ity of most countries to provide adequate food, clothing, housing or minimal living incomes, thereby straining the internal finances of host nations. Second, it is undeniable that social problems continue to follow upon the build-up of Islamic immigrant populations. In several major cities, the concentration of Islamic populations in specific areas has led to demands for the imposition of Sharia law over national laws, leading to growing uneasiness among non-Islamic populations living within those zones. There is yet another series of events which is causing a great deal of uncer- tainty among world leaders, reflecting specific concerns for the safety and reli- ability of the world's petroleum delivery systems. Specifically, a huge rift has developed between Saudi Arabia and Iran. The rift was opened when Saudi Arabia executed prominent Moslem Shiite clergyman, Sheik Nimr al-Nimr, who had a wide fol- lowing in Iran, along with 46 others in early November. Iranian protestors then sacked the Saudi embassy in Teheran and the Saudi Kingdom then immediately sev- ered relations with Iran, recalling their ambassador and expelling Iranian diplo- mats from Saudi Arabia. Other Arab nations then began to take sides and a war of words quickly escalated. For example, the New York Times quoted the supreme leader of Iran, Ayatollah Ali Khamenei, as declaring, "…Saudi Arabia will face vengeance for the execution of Sheik al-Nimr." The paper also noted, "The heated rhetoric also underscored the mounting tensions between the two powers." One look at a Persian Gulf map tells quite a story in relation to petroleum. Saudi Arabia occupies the south shore of the vital Straits of Hormuz while Iran occupies the north shore. This strait is the narrow outlet through which all Middle East petroleum exits the Persian Gulf and if either nation uses its military to shut down that narrow opening, world- wide oil shortages could soon replace the present glut on oil markets – presumably driving prices sharply higher and dra- matically raising the level of industrial uncertainties. All of these events are now combining and potentially impacting the precious metals in a positive dynamic – investors seeking a safe haven – which we have not seen in some time. However, while gold and silver advocates hope for a precious metals bull market, we also would deeply regret a worsening of social and economic tensions. n This material is taken from sources believed to be reliable and is provided for information only. Any investment decision should be made only after prior consultation with investment professionals. Leonard Melman is a financial and political writer who focuses on issues relating to the resource sector. Mr. Melman lives in Nanoose Bay, British Columbia, Canada and can be reached at lmelman@ shaw.ca The Fear Equation