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Tuesday, December 26, 2006

Gold and Iran

I apologize for my light posting schedule during the holidays. But it has been a parade of people and presents through our humble home. We hosted Christmas Eve dinner AND Christmas Day dinner. And today, (Boxing Day) I spent the morning playing with the new pressure cleaner that Santa brought me. Nothing says the Day after Christmas like blasting the scum off your sidewalk, eh? LOL!

And yet the world doesn't stop. So, I've spent this afternoon catching up to speed. Did you see the nice bounce in gold today? It was as much as $9 higher thanks to Iran. You'll remember that last Thursday I told you to "Keep Your Eye on Iran," because it was "likely
we're about to enter a new cycle of escalated rhetoric between the US and Iran."

And that's just what is happening.

The headline on Bloomberg says: Gold Prices Gain as Iran Nuclear Dispute Spurs Demand for Haven
Dec. 26 (Bloomberg) -- Gold in New York rose the most in a week after Iran rejected a United Nations resolution imposing sanctions and said the country will continue its nuclear program, boosting the appeal of the metal as a haven.

Read the rest here:
Now, most people roll their eyes when they hear the Iranians say they need nuclear power for fuel. After all, Iran is sitting on one of the richest desposits of oil and gas in the world, right? But it's also one of the most mismanaged oil and gas deposits in the world. Hence, we get headlines like this...

Iran’s nuclear drive linked to looming oil crisis

For at least 18 months, Iran has failed to meet its quota for oil production set by the Organisation of the Petroleum Exporting Countries, he said.

The strong suggestion, Stern said, is that Iran's oil production is now actually falling, despite the bonanza that exporters have enjoyed from a period of record-high crude prices.

...Overall, according to Stern, it "seems plausible that Iran's claim to need nuclear power might be genuine, an indicator of distress from anticipated export revenue shortfalls."

And at this link, we read: "Iran earns about $50 billion a year in oil exports. The decline is estimated at 10 to 12 per cent annually. In less than five years exports could be halved and then disappear by 2015, Stern predicted."

Ay-yi-yi! Will a Iran that is seeing its oil revenues plunge be more dangerous or less dangerous? Anyway, you can see that with a new nuclear brouhaha brewing between the US and Iran, the "safe money" will likely migrate into gold. Again.

Of course, rising geopolticial tensions are also good for the US dollar (because that's seen as the safe-haven currency). So, we could be entering one of those periods where the US dollar and gold go higher at the same time. But for how long?

Meanwhile, OPEC seems to be proceeding with production cuts and Kuwait says its Burgan Oil Field -- already known to have peaked -- is seeing production drop even faster than expected.

But you want to think about something really scary? I keep raising the alarm about Mexico's giant Cantarell oil field, which is serious decline and probably headed for catastrophic decline. Hence, I find it interesting to read:

Declining output from the aging Cantarell field will trim Mexico's output of Mayan heavy crude oil by 50,000 barrels per day from early January, a leading oil official in the country said.

Mexico's oil exports of 1.85 milllion bpd will dip to 1.8 million bpd from 8 January, said Raul Cardoso, the head of Mexico's delegation attending Thursday's Opec meeting in Nigeria.

Read the rest by CLICKING HERE. PEMEX says it will bring more production online later next year to make up for declining production. Anyone who thinks it will matter more than a fart in a whirlwind needs their head examined.

Finally, I about fell out of my chair when I read this take on America's financial situation, The US Is Insolvent.

What do you think that will do to the price of gold?
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