How the Middle East influences the price of gold

Of late several Middle Eastern countries seem to have erupted into internal revolutions. Whether these are actually revolutions or simply a vociferous coming together of a younger generation is rather debatable. But fact is that the minute any of the Arabian countries, be it Yemen, Syria Bahrain or Iran burst out into turmoil, oil prices internationally go on a roller coaster ride. When there is an oil crisis, the price of gold automatically shoots up.

It was in the 1970s that the dollar was no longer linked to the price of gold. At that time the price of oil went from $8 to $35 a barrel before it came to settle at more reasonable prices. By then the OPEC nations had already nationalized their productions of oil. They were clear that the trading in oil, in US dollars would continue as long as they were given a guarantee of sovereignty being supported in their countries. It was a mutually beneficial agreement.

Things changed dramatically for the USA when the Shah of Persia was overthrown by religious democracy. This was not something they could deal with. In the same vein democracy was installed in Iraq recently with Shiite muslims, who are in majority taking up power. And considering that the USA is pulling out of Iraq now, its neighbor, Iran, equally strong in an Shiite population has more control over the country. Saudi Arabia, another main oil producing nation has an 85% Sunni population, but the remaining 75% of Shiites are making it increasingly clear that they want more in their favor in terms of administration. The same is the case with neighboring Bahrain.

With the price of oil being on constant tenterhooks, the prices of gold which has always had an emotional aspect attached to it will be regarded as a more stable form of investment. With more and more countries investing in gold it is natural for prices of this commodity to go up and it becoming scarce.

Here is a look at how the scenario can change the price of gold. Bahrain is the central location for US presence in the Gulf. They are spread over the Persian Gulf right from the Gulf of Iran. This where the shipping lines for oil are placed. Now should a Shiite government come into place, monarchy would be taken off and Bahrain would end up being obligated to support a Shiite government. This is largely believed to be the effect of the influence of Iran on Bahrain. Should this happen, then there would be a major conflict of interest as far as Bahrain and the USA is conce
ed and this can set the prices of crude oil berserk.

Though this is an imaginary scenario, political leanings are such that it can happen at any time. And if it does, that would mean the price of gold would shoot up as well.