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How To Profit From International Violence

18 February 2011 15 views No CommentEmail This Post Email This Post

The past few weeks have seen a spate of violence in the Middle East. First it was in Egypt, followed by violence in Bahrain as well as Libya. International violence always causes a spike in gold and silver prices. Check out this snippet from Bloomberg:

Gold rose, silver gained to a 30- year high and palladium jumped to the highest price in almost 10 years on demand for precious metals to hedge against declines in other assets because of unrest in the Middle East.

At least five people have been killed since demonstrations against Bahrain’s ruling Al Khalifa family began on Feb. 14. Demonstrators in Libya yesterday demanded the government’s overthrow. Gold bar and coin demand in the Middle East jumped 39 percent in the fourth quarter from a year earlier, according to World Gold Council figures released yesterday.

“If you see violence, you would buy gold expecting that the domestics would buy gold,” said Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany. The record for spot gold is $1,431.25 an ounce, set on Dec. 7. The metal will probably climb to $1,440 in two or three weeks, Fertig said.

You can speculate on short-term price movements through futures, ETFs, options on futures or ETFs, as well as the physical metal itself. You’d definitely prefer the physical metal if you’re in one of those countries that is actually experiencing violence or civil unrest.

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