Saudi Purge Prompts Higher Prices for Oil, Precious Metals

Midday Monday, the commodity complex (especially gold, silver and WTI crude oil) took off to the upside, and, by the end of the day, had maintained their newfound levels, oil hitting a nearly three-year high.

This dramatic rise in the price of oil coincides with tumultuous incidents in Saudi Arabia, wherein 11 princes, four ministers and several former ministers have been detained. Some prominent businessman have also been placed on a so-called "no fly" list, as Crown Prince Mohammed bin Salman purges his enemies in an overt effort to considerate power in the kingdom.

Oil rising and Saudi unrest are not isolated events, as neither is the incidental visit by President Trump some months ago and the more recent visit by Trump advisor and son-in-law Jared Kushner.

The Saudis have seen their profits collapse as oil has languished under $50 for years, but the political shakeup may have more to do with overall foreign interests, primarily focused on investments in US companies such as Citibank and Twitter, via the kingdom's sovereign wealth fund.

Silver and gold also rising at the same time during the day as oil confirms that there was coordinated buying of commodities in the futures market. The move was far from insignificant and was presaged by a similar move to the downside in the complex on Friday, prior to the Saudi purge, which went public on Sunday.

With President Trump safely traveling in the Pacific, the intrigue is high that something major is afoot globally, recalling Trump's cryptic tweet a few weeks ago, "the calm before the storm."

It seems that the storm has arrived, at least in the middle East. Whether it continues to lash out across Europe and the United States is, at this time, still conjecture.

As has been demonstrated periodically in the past, commodity futures can be highly volatile and can have profound effects further into the supply and demand chain. If oil continues to rise, it may be time to take any number of protective measures, from purchasing a fuel-efficient vehicle, to selling the dollar, to buying precious metal in anticipation of a major - and long overdue - breakout.

While nothing in the interconnected world of finance operates in a vacuum, stocks could also feel some heat, though the markets have more than ample protection on the downside via central bank stealth and overt (Swiss National Bank) purchases.

It is apparent, however, that given the Saudi purge and the rise in the price of oil, something big is happening.

At the Close, Monday, November 6, 2017:
Dow: 23,548.42, +9.23 (+0.04%)
NASDAQ: 6,786.44, +22.00 (+0.33%)
S&P 500: 2,591.13, +3.29 (+0.13%)
NYSE Composite: 12,400.93, +27.87 (+0.23%)