How Trump Neutered China, Iran, Russia, ISIS, North Korea and Syria in a Week12 min read


History has proven gold does not experience sustained rallies during or after a war, but it performs very well leading up to new conflicts. And right now, more so than any time in the last decade, the world is ripe with geopolitical tension. Trump’s stock market rally has been put on hold as the Dow declined three days in a row, while gold closed higher for its 5th consecutive trading day Friday.

 

Trump's stock market
chart source: Market Realist

 

Aside from the defense sector, which is the biggest industry in the world by global product/services traded, war creates losses for most. It puts us on our heels as investors and makes us rightfully defensive in our capital allocation.

War shines light on the vulnerability of nations; and their domestic currencies. Bear in mind, we’ve been in the middle of a global currency war for the better part of the last decade. Throw violence into this mix and we could see prominent currencies really start to crumble.

As history has taught us, wars can set the stage for an upheaval of the monetary system, as we saw with the American Civil War, Bretton Woods (which resulted in the USD becoming the global reserve currency, backed by gold, following WWII) and many other historical conflicts.

 

Will Trump’s Stock Market or Gold Prevail in this time of War?

 

With Trump in office and Washington once again dropping bombs in the Middle East, a new level of global tension has arrived. While Trump’s stock market and the U.S. dollar initially responded well to news that America had begun bombing in Syria, both have since fallen back, while gold has trended higher, day after day this past week.

We have been bullish on gold for months, predicting this breakout and believe it will continue as tension increases from the Middle East to Asia.

Gold traded to its highest level since the middle of November, Thursday ($1,288 per ounce); this is significant given the precious metal broke above its 200 day moving average after weeks of trading sideways.

Gold rising

 

Trump (who we dubbed ‘The Inflation President‘) once again talked down the U.S. dollar as he voiced his support for low rates and a weaker dollar.

Following a chemical weapon attack, which reportedly killed nearly 100 people last week in Syria, President Trump ordered a retaliatory 50+ Tomahawk missile attack on Assad’s forces. The strikes occurred while Trump simultaneously dined with Chinese President Xi Jinping at his Mar-a-Lago Estate in South Beach, Florida, causing many to believe it was as much a retaliation as it was a stern message to other world powers (China included)…

In addition, America’s renewed interest in Syria has quelled any conspiracy that Trump is in bed with Putin and Russia; the ease with which establishment Republicans have moved to Trump’s corner after one single event is telling. The silver lining for Trump’s Administration is that he may be able to get a few things done if the Neocons (led by McCain and Graham) unite behind him.

The below satellite image shows the destroyed Syrian airbase where the chemical strike is thought to have been initiated.

 

Syria war intensifies
source: Digital Globe

 

Russia was quick to respond to Trump’s bold attack, announcing to the world that the US has “completely ruined” relations with Moscow.

Trump ensured his first official military strike was all business as a Tomahawk hit the Syrian airbase every 10 seconds. For the United States, the attack was the most intense since the first night of the 2003 Iraq war.

It’s important to remember that Trump expressed his hesitancy to get involved in Syria or the Middle East as a whole, during his campaign, but the graphic images of babies dying at the hands of chemical warfare was likely too much for him. Emotions may have taken over.

Russia and U.S. face off in Syria

 

Trump may also be interested in succeeding where so many US Presidents have failed (the man certainly has an ego). In an April 11th piece from Robin Wright of The New Yorker titled The Assad Family: Nemesis of Nine U.S. Presidents, she writes,

 

“Syria had been weak and unstable after independence from France, in 1946. It witnessed twenty coups in twenty-one years. Assad’s was the last, in 1970.”

 

The Assad regime has proven over many decades it knows how to stay in power. And Syria is a key regional player, supported by Iran and Russia, two of the world’s largest exporters of oil and gas. As Canadians, that fact alone is cause enough to study the war in Syria and its culture.

 

Syria Helped Create Hezbollah in 1982 Lebanon War

 

The Israel Defense Forces (IDF) invaded southern Lebanon on June 6th 1982 after countless attacks by the Palestine Liberation Organization (PLO) who were operating in southern Lebanon.

Wright, from The New Yorker, explains the role Syria played in this conflict:

“Assad played brazen strategic games to sustain Syrian leverage. During the Israeli invasion, he supported the deployment of Iranian Revolutionary Guards in Lebanon-and the creation of a new Shiite militia that grew into Hezbollah.”

 

And that,

“Thirty-five years later, Hezbollah is one of the most powerful militias in the Middle East. Tens of thousands of its fighters are now helping the Assad dynasty hold on to power.”

 

On Hezbollah, Wright explains,

“It was blamed, in April, 1983, for the bombing of the U.S. Embassy in Beirut, the first suicide attack against an American target anywhere. It was followed by attacks on U.S. Marine peacekeepers deployed in Lebanon, where more than two hundred Navy personnel were killed.”

 

Beirut Bombing
source: ki-media.blogspot.ca

 

That first attack on the U.S. Embassy in Lebanon was when and where everything changed for American foreign policy in the Middle East. Initially, Ronald Reagan was not fully supportive of Israel and its campaign against Lebanon, but after the Beirut attack he was forced to engage; it was at this moment in human history when terrorism became a real threat to the West.

In the book REAGAN, The Life, author H.W. Brands quoted part of President Reagan’s response to the families and nation after the devastating Beirut attack:

“We would indeed fail them if we let that act deter us from carrying on their mission of brotherhood and peace… Let us here in their presence serve notice to the cowardly, skulking barbarians in the world that they will not have their way.”

 

More than 30 years later, President Trump is now working to undermine Syria and its supporters. The new President exclaimed last week,

“My attitude toward Syria and Assad has changed very much… You’re now talking about a whole different level.”

 

When asked whether further military action was in the cards, Trump responded,

“I’m not saying I’m doing anything one way or another, but I’m certainly not going to be telling you… Militarily, I don’t like to say where I’m going and what I’m doing.”

 

Just a few days later, the Trump Administration dropped the most powerful non-nuclear bomb on ISIS targets in Afghanistan. Much like the presidential campaign, the Trump's Stock Market pauses after attacksmedia has rushed to cover Trump’s latest bold action, missing the details in between.

Trump’s alleged connections to Russia? That was soooo last month…

Known as a GBU-43/B Massive Ordnance Air Blast Bomb (MOAB) it is a 30-foot-long, 21,600-pound, GPS-guided munition. Could this be any more Trump? The biggest bomb dropped by the US military in nearly twenty years. Trump now has a taste for blood, his finger is on the trigger and he is sending a very clear message to America’s enemies that he is prepared to pull it at a moment’s notice. He revels in the element of surprise…

 

The MOAB utilized by Trump to attack ISIS leaders is so large it requires being dropped out the back of a cargo plane.

 

 

Senator Lindsey Graham, a South Carolina Republican and perhaps Trump’s biggest critic inside the party, tweeted:

“I hope America’s adversaries are watching & now understand there’s a new sheriff in town.”

 

These turncoats should be ashamed of themselves. It gives us pause when politicians like McCain and Graham are now cheerleaders for Trump.

 

Back to the rise of terrorism and Syria’s role in the Middle East…

 

More than ten years ago, the 2006 Israel-Hezbollah War (part II) occurred in Lebanon and Northern Israel. The principal combatants were Hezbollah paramilitary forces and the Israel Defense Forces (IDF). The conflict began on July 12th 2006 and halted in September of that year when Israel lifted its naval blockade of Lebanon.

The Iranians supported Hezbollah immensely throughout this conflict. According to Eyal Zisser, who published a white paper titled Iranian Involvement in Lebanon,

“…it seems more accurate to call this war – as in fact, several commentators proposed during the course of the fighting – the First Israel-Iran War.”

 

Ten years after the war and there is another build-up of troops on the Lebanon border… neither Israel nor Hezbollah appear ready to talk or back down.

In late-March, Jesse Rosenfeld from The Nation reported that,

“…according to a Hezbollah commander based in southern Lebanon, the nature of their next conflict will be shaped by his organization’s gains in the Syrian civil war.”

 

The Hezbollah Commander explained,

“We’ve got heavy long-range missiles, directly from the Russians, that can hit anywhere in Israel.”

 

Syria & The Real Reason Behind the Conflict

 

Remember, the ongoing Syrian war is being fought so bitterly because of a pipeline, which we wrote about in an August 21st, 2016 Weekly Volume titled, A World Currency is Born. Below is a short excerpt explaining what is going on in Syria…

“The route of the pipeline being stealthy fought over is mapped below:

Syria war surrounds pipeline
source: oil-price.net

Why is this a must win for Iran and Russia?

Both Iran and Russia have been reeling under low oil prices, and they are desperate to control exports for European energy markets. To lose that marketplace would be the end of both countries’ geopolitical ambitions.

Professor Mitchell Orenstein went on to explain,

“…in 2009, Qatar proposed to build a pipeline to send its gas northwest via Saudi Arabia, Jordan, and Syria to Turkey… However, Syrian President Bashar al-Assad refused to sign the plan; Russia, which did not want to see its position in European gas markets undermined, put him under intense pressure not to…”

The crux of the matter is that Russia’s Gazprom sells nearly 80% of its gas to Europe.”

 

If Assad is removed from power, the US will be able to install another puppet leader in the Middle East, but more importantly, it would devastate Russia’s revenues from gas exports to Europe.

If the US becomes committed to war in Syria (rumours suggest Trump is considering putting 50,000 American troops on the ground), Assad’s days in power may be over; and a civil war that has displaced half the population of Syria (11 million people according to World Vision) may be entering a new chapter. From a larger perspective, if the US enters in a more meaningful way, the next escalation could come from Assad’s backers: Iran and Russia.

The chance that Russia, Iran and the US may face off in Syria has many investors turning to gold as a safe haven. What’s more, this may not be the most intense brewing conflict in the world right now…

 

All Eyes on North Korea | The Craziest of them All

 

In the hours after President Trump and Chinese President Xi Jinping met in Florida, both moved military assets into proximity of North Korea.

 

North Korea may be preparing for war
North Korea military leaders congregate to listen to their supreme leader Kim Jong-un

 

After refusing delivery of North Korean coal (China is the country’s biggest trade partner) on Monday, April 10th, a South Korean Paper reported that China had deployed 150,000 troops to the North Korea border.

Zero Hedge reported,

“According to Korean news agency Chosun, the “Chinese army has deployed about 150,000 troops to the North Korean border in two groups to prepare for unforeseen circumstances.” The reason: the prospect of “military options”, such as preemptive attacks on North Korea, like the one the United States launched on Syria.”

 

China has officially banned all imports of North Korean coal, arguably the country’s most important export product.

At the same time China’s reported military actions became public, Trump ordered aircraft carrier USS Carl Vinson (and its strike group) off the coast of the Korean peninsula. In predictable fashion, North Korea released some flamboyant remarks, warning it was ready for “war” in the event of further military moves…

Supercarrier USS Carl Vinson is now roaming the seas near North Korea.

 

Gold’s explosion on Tuesday came hours after North Korea beefed up its rhetoric. North Korean officials, who were quoted by state news agency KCNA, stated,

“We will hold the U.S. wholly accountable for the catastrophic consequences to be entailed by its outrageous actions.”

 

The President responded in typical Trump fashion… via Twitter.

Trump tweet

Four minutes later, Trump followed up with an even bolder tweet:

Trump tweets

Interestingly enough, China has responded. Aside from the 150,000 troops moved to the North Korea border, the Global Times tabloid, owned and operated by the Communist Party’s People’s Daily newspaper, issued a stark warning. According to the Daily Caller:

 

“China has a bottom line that it will protect at all costs, that is, the security and stability of northeast China,” the report stated. “If the bottom line is touched, China will employ all means available including the military means to strike back… By that time, it is not an issue of discussion whether China acquiesces in the US’ blows, but the Chinese People’s Liberation Army (PLA) will launch attacks [on] DPRK nuclear facilities on its own.”

 

Japan announced Wednesday it was sending several warships to join the US aircraft carrier “strike group” which is already offshore the Korean peninsula.

From strikes in Syria, to mounting tensions with Russia and North Korea, American influence is being felt globally. Geopolitical tension, not trade or even France’s election, will continue to favour hard assets, namely gold and oil.

All the best with your investments,

 

PINNACLEDIGEST.COM

 

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