Will Rumored Israeli Attack On Iran Lead to Spike In Price Of Gold and Oil

The price of gold is rallying this morning. With all the turmoil in Europe, there is plenty pf reason to be bullish about gold regardless of the increasing tensions in the Mideast. However, the rumors of a pending Israeli attack on Iranian nuclear facilities could be a contributing factor in pushing the price of the shiny metal higher.

According to a well known aphorism, "buy on the rumor and sell on the news". Based on this advice and all the rumors that are flying around, it would seem likely that the the price for gold and oil increase this week. The rumors are so widespread that they are even being reported on in Beijing. "Israeli Afoot to Attack Iran" is a lead story in Xinhuanet. It would not be surprising if demand from Chinese readers of this article has an strong impact on the price of gold.

An interesting aspect of the Chinese reporting on the likelihood of an attack is that they assume Israel would not attack without a U.S. go ahead. According to Xinhuanet, "still, regardless of whether Israel really intends to attack Iran, the final say would emanate from Washington. Hawkish as Israel's leaders may be, they would not attack Iran without U.S.permission." Frankly, I am not convinced that Israel would only attack Iran if doing so was sanctioned by the U.S. Given that the Obama administration's public posture is that sanctions are a viable path to deter Iran from pursuing nuclear weapons, Israel might act unilaterally. Whether the wishful thinking of the official U.S. position that sanctions could actually deter Iran is just posturing or not, the Israeli's realize that there are only two choices in regard to Iran's nuclear ambitions: 1) accept a nuclear armed Iran; or 2) destroy their capability to develop nuclear weapons. Are the Israel's really willing to give the U.S. President the authority to veto an action that they view to be critical to the survival of their nation.

However, for speculators, whether an attack is truly likely or not, only whether the rumors are likely to move the prices of gold and oil matters.

Iran's threats to close the Gulf of Hormuz are all the more reason for the U.S to aggressively pursue energy independence. And if the price of oil this week is headed higher, it might not be a bad idea to head to the gas station this morning and top off your tank at today's price.