North Korean Nuclear Test Moves Gold Prices to the Brink

what does norht korean nuclear test mean for price of gold?
Photo Courtesy of Sky News

In the past week you have seen gold prices climb out of their pullback of just under $1,300 to rally as high as over $1,343 per ounce. This impressive bottom to top rally represents a solid gain of more than three percent so far. The main driver of the galloping gold price over the last week has centered on the continuing and obviously deteriorating situation with North Korea.

Not content with five major nuclear bomb tests so far, the rogue nation engaged in a sixth one this past weekend. Worst of all, this was their first hydrogen bomb detonation. This bomb had 10 times the destructive power as the two the United States dropped on Japan at the tail end of World War II. Even more disturbing still, it appears to have been miniaturized to the point that the destructive weapon could compactly fit on the tip of one of the North’s terrifying new ICBM missiles.

As if it isn’t bad enough that the North Koreans now have the 1. The range and 2. The miniature hydrogen nuclear bomb which they need to hit the mainland continental U.S., they were gleeful that their weapon can also be used to create a destructive civilization-ending Electro Magnetic Pulse EMP over the continental United States. Last week’s once-tame worries are nothing but a happy memory now.

It is only a wonder that gold prices have not run up higher since the hydrogen bomb test proved to be a permanent game changer in the nuclear standoff with North Korea. You can see what the North Koreans have been up to all year in this graphic below:

diagram of excalating North Korea Tensions

Gold is your only historically proven, best and last line of defense against an economy-shattering war with the North. You have passed the point of no return in imagining that it could never happen now. As we stand potentially poised on the brink of a most destructive regional conflict, you need to hedge your portfolio with its only effective life-line in the event of a messy conflagration on the Korean Peninsula once more.

U.S. Mulling What Sanctions to Try Next

Obviously the sanction efforts have been an important and laughable joke (about which the North Koreans are still laughing). Russian President Vladimir Putin had the quote of the week on this very subject when he sanguinely stated the obvious truth about the North Koreans and their beloved Nuclear weapons program with:

“There’s no point in giving into emotions and backing North Korea into a corner. More than ever now we need to show restraint and avoid any steps that could escalate tensions. They’ll eat grass, but they won’t abandon their program unless they feel secure.”

As Putin and China’s Xi both hold all important vetoes on the United Nations’ Security Council, their collective opinions on the issue matter enormously. Putin has just informed the world that we are all wasting our time in trying to stop them with sanctions. So far as the U.S. and its Asian allies are concerned, that does not leave much in the way of viable alternatives besides a punishing and powerful first strike which might hope (and possibly in vain) to take out the North’s considerable military firepower and hardware.

Why is gold up so much as it is? Probably because everyone knows that the probable collateral damage of such an increasingly possible military strike scenario would likely include much of Seoul, South Korea (critical to the Asian and World economies) and even a good portion of Tokyo and industrial and G7 world-leading Japan as well.

(Buying gold as an investment? Read our gold buying guide here. Want to open a gold IRA? Check out our list of the best gold IRA companies here.)

Whether or not the North Koreans can actually rain down fire and fury on mainland America or not is irrelevant at this point. If they sink South Korea or Japan, the global economic game is over to all intents and purposes in any case.  You had better pay attention to this troubling situation and take action to protect both your investment and retirement portfolios with gold while you still can. This graphic below gives you all the many reminder of why:

missile testing timeline

 

Another factor that has been supporting and boosting gold prices this last week surrounds a pair of Tweets from the President of the United States and a leading Republican congressman Representative Peter King. These are as follows:

 

This certainly sounds like the prelude to a trade tit-for-tat spat and probably trade war as well with the Middle Kingdom in the making. The real question is what will be the most important and vulnerable targets in China at this point? The suggestions analysts are running up the proverbial flagpoles surround the Big Four major Chinese banks the Industrial and Commercial Bank of China, China Construction Bank, the Agricultural Bank of China, and Bank of China.

The problem with this idea is that these four banks have now become the four largest banks in the world by assets, eclipsing even American JP Morgan Chase and Britain’s global powerhouse HSBC. The Industrial and Commercial Bank of China boasts assets of $3.47 trillion (end of 2016), while the other members of the Chinese gang of four banks claim assets totaling from $3.02 trillion to $2.60 trillion, per S&P Global Market Intelligence. On top of this, the Chinese banking system has just become the biggest in the entire world with its total assets of $33 trillion, having surpassed that prior record holder the Euro Zone only this past year, per analysis carried out by the Financial Times of Britain.

Compare these four Chinese mega banks to JP Morgan Chase’s sixth top spot ranking with considerable assets of $2.49 trillion (end of 2016) and HSBC’s seventh top spot ranking with $2.37 trillion in assets. Now you can see the clear danger. The U.S. risks actually wrecking the Chinese, Asian, (and even to some extent global) banking systems and financial networks by penalizing the Chinese banks for the Chinese government refusing to cooperate in strangling North Korea to its proverbial knees in submission.

The Sanctions Would Only Enrage the Chinese and Risk the World Economy in the Process

Even if the U.S. were to power ahead with these Chinese bank-crippling sanctions, all this would serve to do is to anger the Chinese and hurt their (and everyone else’s) banking system. It would not do a thing to force North Korea to cooperate with the global consensus and will. While the Bank of China is believed to have aided the North Koreans in evading and avoiding the worldwide UN backed sanctions regime (and probably deserves to be blacklisted), Pyongyang can continue to develop its nuclear and ballistic missile programs with impunity even if the Chinese government, banking system, and economy are severely punished by the Americans in vain retaliation.

Yet a very real casualty of this increasingly likely economic scenario is the fall of the U.S. and developed nations’ overstretched and irrationally high stock and bond markets in consequence. Your retirement portfolio does not have to crash and burn alongside them. If you invest in bullion gold today before the crisis becomes any worse, you can still acquire enough gold at a reasonable price to protect your precious retirement assets. You could also go for “new age gold” and invest in a bitcoin individual retirement account.

Get yours today, before the North Koreans complete their preparations for yet another intercontinental ballistic missile launch they are already readying in advance of their September 9th celebration of the founding of the regime and state.