No matter what happens, I am confident the Iran war will be a major tailwind for gold.
Here is an overview of how I see the conflict unfolding and its major financial implications.
- The Strait of Hormuz is the world’s most important energy corridor.
- Iran now has undisputed control over Hormuz.
- Stripping Iran of that control would require a successful full-scale ground invasion of Iran, a country roughly 40 times the size of Switzerland.
- A full-scale ground invasion is unlikely to happen, and even if it somehow does, it is unlikely to succeed.
- Iran is therefore likely to retain control over Hormuz.
- The US is likely to suffer a historic strategic defeat, no matter how it tries to spin it.
- The US was already on the verge of a debt crisis before the Iran war.
- The direct and indirect effects of the Iran war are likely to worsen that debt crisis.
- The US government will likely debase the currency in an attempt to deal with its worsening debt problems.
- The US dollar’s status as the world’s reserve currency is likely to be lost amid a debt crisis, rising inflation, and a major geopolitical defeat.
- As a hard-money alternative to the dollar, gold is likely to be a primary beneficiary.
Investment Outcome #1: The US Dollar Will Lose Its Privileged Position
“When the world’s dominant power that has the world’s reserve currency is overextended financially, and it reveals its weakness by losing both military and financial control, watch out for allies and creditors losing confidence, the loss of its reserve currency status, the selling of its debt assets, and the weakening of its currency, especially relative to gold.” — Ray Dalio
While the US dollar is currently the leading global currency, it was already on a path of inevitable debasement and eventual collapse—even before considering the compounding effects of the Iran war.
The only reason the US government has managed to avoid severe consequences from its inflationary monetary policies is the US dollar’s status as the world’s top reserve currency, thanks to Washington’s military and economic dominance that has prevailed since the end of World War 2. However, as this dominance wanes, so will the dollar’s purchasing power.
The US government’s ability to hide the effects of its rampant money printing by offloading trillions of dollars to foreigners is nearing its end.
That’s terrible news for the US dollar.
As the world digests the Iran war and its consequences, I expect we’ll see a multipolar world order emerge and the US dollar lose its privileged position as the world’s premier reserve asset.
An ocean of capital could flow into gold as the world looks for a sound monetary alternative to the fading US dollar and whatever scheme Russia and China cook up.
That’s why I think the Iran war will add rocket fuel to a major investment trend already in motion—the re-monetization of gold.
Investment Outcome #2: A Scramble for Strategic Commodities
Hydrocarbons—oil, coal, and natural gas—as well as copper, uranium, and rare earth elements, are among the most strategically important commodities.
The Iran war is likely to make the importance of controlling key inputs impossible to ignore, and I expect that to be bullish for companies with access to strategic commodities in stable business jurisdictions—most of all in the US, then in the Western Hemisphere, and finally in more distant US allies such as Australia.
Companies that secure access to domestic or allied sources of strategic commodities will be at a distinct advantage. Relying on foreign suppliers carries significant political risk.
Further supply disruptions of hydrocarbons and other strategic commodities means higher prices. That’s an outcome I think we can bet on.
On the demand side, the US, Russia, and China will likely place even greater emphasis on securing critical commodities and ensuring stable supply chains.
In short, I believe the Iran war will drive both rising demand and unstable supplies, creating a volatile yet opportunistic environment.
Meanwhile, commodity prices are at all-time lows relative to other assets.
That’s why gaining exposure to companies with strategic commodities located in the US or allied jurisdictions could be a winning move.
Conclusion
The Iran war could be one of the major catalysts that accelerates gold’s return to the center of the monetary system.
But it is not happening in isolation.
It is unfolding against the backdrop of sky-high debt, endless money printing, rising geopolitical conflict, and a fragile financial system that may be approaching a historic breaking point.
In other words, the coming shift could be much bigger than gold.
A dangerous combination of sky-high debt, endless money printing, geopolitical conflict, and deep cultural and social shifts is now sweeping through the West.
That’s why I recently prepared a special report: The Most Dangerous Economic Crisis in 100 Years… the Top 3 Strategies You Need Right Now.
In it, you’ll discover the economic, political, and cultural trends unfolding right now… the risks they pose to your money and personal freedom… and the top 3 strategies you can use to prepare.
