You awaken early after a restless night’s sleep… your mind was preoccupied about events of the past few weeks.

Ever since the rocket attacks in the summer of 2006 Israel vowed they would never again reply to terrorist’s aggression in such a timid military fashion.  For over two months Israel has been suffering escalating rocket attacks from not only southern Lebanon, but also the Gaza strip.  Six months ago Israel’s Prime Minister Benjamin Netanyahu presented UN Secretary General Bill Clinton with irrefutable proof of Syria’s complicit aid and participation in these attacks and incursions.  IAF raids initially were concentrated upon the Syrian/Lebanon border.  As the situation worsened the IAF air attacks deepened to the outskirts of Damascus.  Events hit critical mass yesterday when Syria hit Tel Aviv with two Scud D type missiles loaded with air-burst chemical weapons.  Casualties are estimated in the thousands.

America’s financial markets, as well as the U.S. dollar, have consistently been declining over the past three months in spite of Treasury Secretary Sandy Berger’s assurance that the American dollar is in good hands.  Additionally, many investors are still jittery over the nearly total shutdown of America’s internet system for three consecutive days last month.  American intelligence has since discovered that the shutdown was due to a coordinated internet attack by China, Russia, the Middle East, and France.  Google’s stock price, along with many other internet-dependent companies, is down over 85%.  The question now is how will the market react in light of Syria’s attack on Israel with WMDs?

After preparing that needed hot mug of coffee you go to your computer to review what the markets did overnight.  There is a misprint on the gold quote.  It says gold is up $200.  Surely they mean $20.  There are other misprints… the Dow is down 2500 points and the S&P is down 30% overnight.  This just can’t be.  After all, Madam Speaker Pelosi has said Assad and Ahmadinejad are wonderful and reasonable leaders we can work with.  What has happened?

Damascus is no more.  According to online news reports Israel has hit Damascus, as well as other selected targets in Syria and Iran, with their neutron bombs.  Events threaten to continue to spiral out of control as the day proceeds.  President Hillary Rodham says there is no need for alarm.  After consultation with Defense Secretary Barney Frank, the President is taking the following actions: 1) she is sending America’s two remaining cruisers to patrol the Persian Gulf, and 2) the 15 remaining bombers (B52s) mothballed at Davis Monthan desert storage facility will be brought back to serviceability within three months and dispatched to the Middle East.  (There are no fighter jets.  After signing an eternal non-aggression pack with President Putin Madam President destroyed all of America’s “offensive” jets.  Putin promises to do the same within the next five years.)  Chairman of the Joint Chiefs of Staff, General Hosea Gonzalez, promises American soldiers are ready if called upon.  (Both the Democrats and Republicans viewed the Mexican guest-worker program so favorably they expanded it to include the military.)  President Rodham has also called on the Senate Chaplain, Imam Sayid-Al-Yomama, to pray for world peace. 

What seems absurd today sounds reasonable in a few short years.  If you had asked me which would occur first; gold hitting $2,000 per ounce or a Muslim being elected to Congress, I would have picked the gold option.  I was wrong.  The other event will occur in due time.

The old joke in the gold trading pit was when someone called in to ask why gold prices were lower the floor broker would reply “Just tell them the lower prices are due to a ‘peace scare’.”  In the coming years I foresee these “peace scares” becoming decidedly more rare.  The recent U.S. elections have temporarily obscured the boiling magma of world events which are about to explode on the geo-political surface of the world.  Keep in mind that the epicenter of world events will be upon the Middle East.  Here are a few items of special note:

1.      Syrian FM Mualem threatens to start a “countdown to war” with Israel.  Mualem said “If there is no progress (i.e. - giving back) on the Golan Heights issue, the countdown will begin for a new Syrian-Israeli war.”

2.      The IDF General Staff expects a Syrian-Hezbollah war to be launched in the summer of 2007.  However, many of Israel’s army chiefs, including Maj-Gen Eisenkott of the OC Northern Command, judge from Syrian and Iranian military preparations that major hostilities could erupt a lot sooner.

3.      Israel’s Deputy Minister of Defense Sneh says there is no issue he deals with more intensively than the Iranian nuclear issue.  He states, “We must prevent this regime from obtaining nuclear capability at all costs!”

4.      On 11/08/06 Hamas’ military wing called on Muslims around the world to attack American targets.

5.      French and German “peace keeping” troops stated they have been within seconds of shooting at IAF aircraft flying over their positions in Lebanon.  Meanwhile those same troops sit idly by while Syria and Iran literally turn southern Lebanon into an armed terrorist’s camp.

6.      Just in the past two days over 30 Qassam missiles have hit Israel from both Gaza and Lebanon.  How long will Israel allow these attacks to continue?

As one can see from these recent reports, the scenario painted at the first of this article is not that far-fetched.  From my perspective, I would say some of those events fall into the high probability category.  With the incoming Democratic control of both houses of Congress and other countries diversifying their assets away from the U.S. dollar, I foresee an escalating decline in the confidence of our currency while simultaneously gold takes its place as the de facto 3^rd world currency.   

The purpose of this article is not to deal with trend lines, technical indicators, ratios, chart formations, etc. as it relates to gold, but to turn your attention upon possible upcoming world events.  World events are shaping up to propel gold prices to unimagined price levels.  Do you remember when CNBC kept the champagne on ice while waiting for the Dow to move above 12,000?  I doubt any champagne glasses will be clicking on CNBC when gold prices move above $1,000.

Am I a “gold bug”?  No.  There have been many times in recent years when the excuse to not be long (own) gold has been very valid.  Those excuses are fast running out.

Baird Montgomery
Founder - eprofits.com
Co-host of Prosperity for God's People