Gold Above $1,400 on Rising Mid-East Instability

James West

By Jan Harvey
February 21, 2011

Gold prices rose above $1,400 an ounce on Monday for the first time in nearly seven weeks as violence flared in North Africa and the Middle East, boosting interest in the precious metal as a haven from risk.

Tensions have spread from Egypt and Tunisia, where protests unseated leaders earlier this month, across the Middle East and North Africa, threatening the grip of long-entrenched autocratic leaders.

Spot gold rose as high as $1,400.40 an ounce and was bid at $1,399.60 an ounce at 1045 GMT, against $1,388.58 late in New York on Friday. U.S. gold futures for April delivery rose $11.70 an ounce to $1,400.30, having peaked at $1,401.30.

Gold priced in euros hit its highest since January 19 at 1,023.91 euros an ounce, and sterling-priced gold its highest since January 14 at 863.54 pounds an ounce.

“There is no doubt that the recent move higher across the precious metals reflects a degree of safe-haven buying as a result of the unrest in the Middle East,” said Daniel Major, an analyst at RBS Global Banking & Markets.

“If (buying) is not through the exchange-traded funds or a clear change in the net long on Comex, it is most likely to be through the physical market — coin and small bar buying, and I potentially wouldn’t rule out larger purchases by high net worth individuals on the back of the unrest we’re seeing,” he added.

“That has clearly been a game-changer in the last couple of weeks for gold and silver after what was quite a lethargic start to the year in terms of identifiable investment demand in the exchange-traded funds.”

Holdings of the world’s largest gold exchange-traded fund, New York’s SPDR Gold Trust, fell to a nine-month low on Friday at 1,223.098 tons, data from the fund showed, even as prices rallied.

Turkish Foreign Minister Ahmet Davutoglu said on Monday that Tunisia’s revolution could provide a model for other countries seeking reform if it can avoid pitfalls on the path to elections.

Violent unrest against Libya’s Muammar Gaddafi spread to the capital Tripoli on Sunday, and his son vowed to fight until the “last man standing” after scores of protesters were killed in the east of the country.


The resulting risk aversion sparked buying of assets seen as a haven from risk. Bund futures rose as tension in Libya sparked safe-haven flows into German debt, while the Swiss franc rose against the dollar and euro.

Oil prices meanwhile surged nearly $3 a barrel to 2-1/2 year highs as traders eyed unrest in major producer Libya.

European shares eased in response to the tensions, though they later pared losses after well received German and euro zone economic data.

Other precious metals also rallied, with silver touching its highest in 31 years and palladium a 10-year peak. Silver outperformed gold, with the number of silver ounces needed to buy an ounce of gold dropping to around 42, a near 13-year low.

“Precious metals continued to recover as civil unrest intensified in the MENA region, with silver touching levels not seen since the peak of the Hunt Brothers squeeze in 1979/80,” said Morgan Stanley in a note.

“We expect the combination of continued strength in investment demand and a sustained industrial demand recovery will support silver… this year before easing amid improved economic conditions in 2012.”

Silver hit a high of $33.46 and was later at $33.36 an ounce against $32.46. Platinum was at $1,844.25 an ounce against $1,833.50, while palladium peaked at $859 and was later at $855.97 against $848.25.

James West

James West

Editor and Publisher

I employ a Capital Efficiency Model that dictates money should never be exposed for longer than is absolutely necessary to the possibility of being lost. Thus, I routinely sell half my position when a stock doubles from my entry price, and I sell stocks that lose 20%, unless there are...
More Info... | |

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

Free Newsletter,
Priceless Content.

Get more of Midas Letter delivered right to your inbox.

Special Offer

Sign-up today and receive free and immediate access to three recently published special reports!