Even as the last of the U.S.’s troops exit Iraq, a set of fresh developments have fuelled the West’s growing concerns over neighboring Iran’s nuclear and military capabilities. These factors have provided considerable indirect support for silver and gold prices in the early trading sessions of 2012 as investor safe haven demand has again increased significantly after relaxing somewhat during late December’s holiday period.
In response to announcements by Iran that it had successfully tested its homemade nuclear power fuel rods, the EU and U.S. each moved to implement substantial economic sanctions against the Middle Eastern nation, resulting in severe domestic currency pressure. Also, Iran has been holding naval maneuvers and has reportedly tested its long range missiles in recent days, which has further increased tensions with the West.
As a result of these Iran related events, both precious metals have started off the first two weeks of 2012 with a notable rally. In particular, spot silver traded off of its December 29th low of $26.15 to trade in a range finding resistance under and around $30 , while spot gold found good support at $1,522.55 on December 29th to move above it’s 200 day moving average in today’s session.
Successful Iran Nuclear Enrichment Fuels Western Weapons Fears
Perhaps the most troubling recent event regarding Iran was the announcement by the Iranian Students’ News Agency that the country has now developed its own nuclear power rod and successfully inserted it into the core of a nuclear research reactor based in Tehran. This report was based on information obtained from Iran’s nuclear power agency.
Although denied by Iran, Western leaders seem increasingly worried that this could indicate Iran has taken an important step forward in developing a nuclear arsenal.
But, in the past 2 weeks, tensions wound even tighter as the International Atomic Energy Agency officially confirmed that Iran has started enriching uranium to the 20-percent level, which can easily be turned into fissile warhead material. This announcement was released not long after the announcement that Iran would sentence alleged US citizen to the death penalty. This week, the assassination of an Iranian nuclear chemist fuels tensions even further.
Iranian Naval Maneuvers and Missile Tests Could Threaten Strait of Hormuz Closure
Another worrisome development was the announcement by Iranian Deputy Navy Commander Mahmoud Mousavi via Iranian state television on January 2nd of a recent test launch by Iran of long range missiles that occurred during Iran’s 10 day long naval exercises that completed that day. Deputy Commander Mousavi claimed that both surface to surface and shore to sea missiles were tested. Nevertheless, according to Iranian reports, one of the long range missiles tested only had a range of 125 miles.
The so-called Velayat 90 Iranian naval exercises had commenced on December 24th and took place, at least in part, near the eastern entrance of the highly strategic Strait of Hormuz that connects the Persian Gulf and the Gulf of Oman and handles roughly 40% of global oil tanker shipments. Upon the initiation of these maneuvers, the Iranian Navy Commander, Rear Admiral Habibollah Sayyari, said at a press conference that their purpose was to highlight his country’s “military prowess and defense capabilities”.
Although a Strait of Hormuz closure was not explicitly threatened by Iran, such an action was nevertheless simulated as part of the Islamic country’s naval exercises and has contributed to tensions with the U.S. and EU.