It's a long wait

The cost to the world of the Iran war - never mind to the US - is huge and will only get bigger. Crude oil prices are once again above $100/barrel. Gold has traded sideways for the last month; that will change.

Even if the war ended now, the world will have lost 1 billion barrels of crude oil and refined products according to the boss of Vitol, the world's largest independent oil trading company. It's the biggest disruption in his 40 year career, he says.

Fertilizer shortages, a slowdown in copper mining due to sulfuric acid scarcity, airlines cancelling flights because of jet fuel costs...the huge costs of the war are incalculable - $1 trillion (for just the US) is now being bandied about.

Apart from the direct costs of the war, its impact on the direction of interest rates will have considerable influence on the short-term gold price. The US, the UK and the Eurozone all aim to get inflation to 2%/year and keep it there. That hasn't been achieved in the US for the past 5 years.

Even if that 2% were possible it would mean fiat currencies' purchasing power would drop by more than 20% over a decade. With inflation at 4%/year, what your money can buy after 10 years will be cut by one third. When prices rise, the same amount of money buys fewer items. In the last 30 years the purchasing power of the Dollar has fallen by more than 50%. At the same time, gold has galloped ahead, mainly because of the collapse in the fiat money in which it is priced.

Central bank leaders

The heads of central banks in Britain and Europe face a more difficult future than in the US. The European Union (EU) economy commissioner said in early April that the EU is facing a "stagflationary shock" as a result of the war. In the UK a survey by the leading polling firm Ipsos says economic confidence has dropped to the lowest level since 1978; 78% of consumers think the economy will deteriorate in the coming year.

Things are slightly better in the US, a net energy exporter, where unemployment is slightly down, economic growth last year was impressive, and the government will shortly hand out big tax refunds.

That money will certainly help consumer spending, but will it warm up the consumer mood in time for this year's midterm elections?

The persistence of war in the Middle East and the shortages that result from it will be most damaging in Asia and Africa. European countries and the US will be more able to cope.

But the US Dollar, which gained against other fiat currencies at the start of the war, is now down by more than 2% against peers. President Trump may not fret at the Dollar's decline - it will make US exports less expensive.

But in the midst of the continuing uncertainty a fresh doubt is about to be introduced by Washington D.C. Kevin Warsh, the proposed replacement for Jerome Powell as the boss of America's central bank, the Federal Reserve.

Enter Kevin

Warsh told his Senate Banking Committee confirmation hearing this week that he believes a "reform-oriented Fed can make a real difference to the American people." That doesn't really answer whether he is a Presidential supporter of interest rate cuts.

The immediate question for Warsh is where he might like to see the Fed's interest rates, currently at 3.75%. President Trump said last week that interest rates will fall "when Kevin gets in" but that 'getting in' isn't certain. One Republican member of the Banking Committee says he will block Warsh's confirmation until what he called the "vindictive prosecution" of Jerome Powell is dropped. Powell's term as chairman of the Fed ends on 15 May but he stays as a governor until the end of January 2028.

For the moment it's unclear what Warsh will do. We have had a glimpse of his thinking. He has said inflation occurs when government "spends too much and prints too much" and when central banks permits that to happen. Full marks for that.

He is also a fan of lower interest rates, which will encourage investors interested in gold.

But the truth is that everyone should get some gold - with Glint of course, because Glint makes gold usable as money - simply because inflation systematically destroys fiat money's purchasing power.

Never forget one key fact - since 1913 the Dollar has lost almost all its purchasing power. Get gold - secure your assets!

For UK clients: At Glint, we make every effort to demonstrate a balanced conversation between gold, silver, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

For US clients: Graphic representations of value are for illustrative purposes only. The Glint debt card is issued by Sutton Bank, member FDIC. The sale, purchase and storage of precious metals are offered by Glint and not Sutton Bank. Your investment in precious metals through Glint is

·        Not insured by the FDIC.

·        Not a deposit or other obligation of, or guaranteed by, Sutton Bank.

·        Subject to investment risks, including the possible risk of loss of the principal amount invested.

All investments involve risk, including possible loss of principal. The value of precious metals is affected by many economic factors, including but not limited to the current market price, demand, perceived scarcity, and quality of the precious metal. Precious metals can increase or decrease in value. Past performance is not a guarantee of future results. As such, investing in precious metals may not be suitable for everyone.