Safe haven assets continue to march upwards while the conflict in the Middle East widens

Posted by Gavin Chau

The US-Israel is widening its war in the Middle East as the Ukrainian military sounds all but defeated. Safe-haven assets like gold and property in Australia should continue their march upwards. Gold has climbed about 30% in the last 12 months, and house prices in Australia have risen 7.2% (with a total return of 11.2%), defying the high interest rates and nearly two years of a per-capita recession.

I’m sure if Zelensky doesn’t get lynched by hardliners within Ukraine, he will escape to another country to live out his life if he has managed to keep some of the billions in US aid money. As it stands, it seems likely that Russia will annex around 20% of Ukraine and maintain a buffer zone between NATO’s eastward expansion. It would have been better for Zelensky and the citizens of Ukraine if he had stuck to his guns and not reneged on the peace deal offered by Putin before the war began. Now, an entire generation of young men have been wiped out for nothing.

Over to the Middle East.

It’s been a year since the Hamas surprise attack on the Nova music festival in Israel, and as feared, more state actors have been drawn into the conflict. I’ve been looking into the region’s history and the likely motivation of each country religiously since the conflict began. Watching the long cycle of history play out again in real time has been fascinating and horrifying.

Unraveling the relationships between political and religious affiliations in the Middle East is difficult for an outsider. But the contrast between the data and the accounts of retired US military commanders to what we’re being presented officially in the news has somehow managed to lower my trust in the mainstream media even further.

Without delving into the details, this is the story. After flattening 75% of Gaza and killing 10% of the Gazan population in retaliation for Hamas’s attack on the music festival, the fighting has spilled into Lebanon, where the death toll stands around 2000. Hezbollah in Lebanon and Iran have now taken up the fight against the IDF.

The mystery is what Netanyahu’s end game is since Israel can’t take and hold ground in Lebanon against Hezbollah, which is a much more organized fighting force than Hamas. More importantly, Hezbollah has never lost to the Israeli military. Moving across to Iran, the Iranian military was initially created to fight the US. While Israel has air superiority in the region, it will be impossible for such a small country to win against Iran. What we now know is Israel’s ‘Iron Dome’ defense system is not impenetrable, as many videos have surfaced of most of the Iranian missiles successfully impacting military targets within Israel. The only logical conclusion is that Israel would like to draw the US into the war.

The other mystery for us non-elites is why the US government supports Israel at all, other than perhaps a faction within the US government that has always wanted control of Iran and sees Israel as a useful tool to help in that regard. US citizens get no upside in this relationship, and 70% of the American public doesn’t want to see the conflict continue. This proportion is much higher in the younger generations, who already distrust the media.

On one side, we have the US-Israel and NATO (probably apart from Turkey), and on the other side, we have Iran, Russia, and possibly China. Four days ago, Russia warned all Russian citizens to leave Israel – they make up 15 to 20% of the Israeli population. I’m unsure if it’s just a precautionary move or a more troubling sign, but it doesn’t look good if a peace deal can’t be brokered. The problem is a two-state solution doesn’t appear to be something the Israeli political class wants.

What else has been happening?

More cracks appeared in the US Empire as the elite attempt to hold onto power. Gavin Newsom has banned voter ID in all elections in California because it’s ‘racist’. So not only is it not required to show your ID to vote, but it is also illegal to show it.

China has been selling off its US treasury holdings to stimulate its flagging economy. The resulting increase in liquidity has seen the Shanghai Stock Exchange Composite jump by about 30% from the lows. This only adds to the upswing in the global liquidity cycle as the global central banks switch from a tightening to an easing bias. The sudden gold price movement is a precursor for what will come as that tidal wave of money sloshes around looking for a home in assets. It’s best to take a position in your favorite asset class and hang on; the next few years will be crazy!

Posted by Gavin Chau, on 8th Oct 2024