1979 - Iranian Revolution
The Islamic Revolution (also known as the Iran Revolution or 1979 Revolution) refers to events involving the overthrow of Iran's monarchy (Pahlavi dynasty) under Shah Mohammad Reza Pahlavi and its replacement with an Islamic republic under Ayatollah Ruhollah Khomeini, the leader of the revolution.
Demonstrations against the Shah are sometimes said to have begun in January 1978. However, they actually commenced earlier, in October 1977, developing into a campaign of civil resistance that was partly secular and partly religious. Between August and December 1978 strikes and demonstrations paralyzed the country. The Shah left Iran for exile in mid-January 1979, and in the resulting power vacuum two weeks later Ayatollah Khomeini returned to Tehran to a greeting by several million Iranians. The royal regime collapsed shortly after on February 11 when guerrillas and rebel troops overwhelmed troops loyal to the Shah in armed street fighting. Iran voted by national referendum to become an Islamic Republic on April 1, 1979, and to approve a new theocratic constitution whereby Khomeini became Supreme Leader of the country, in December 1979. Wikipedia
2011 - Libyan (Middle East & North Africa) Revolution?
The 2011 Libyan protests are an ongoing series of protests and confrontations occurring in the North African state of Libya against the government of Libya and its head of state, Muammar al-Gaddafi. The unrest began on 15 February 2011 and continues to the present. Media outlets have reported the unrest as being inspired by the uprisings in Egypt and Tunisia, connecting the protests with the wider 2010–2011 Middle East and North Africa protests. According to Richard Engel, NBC News Chief Foreign Correspondent, who entered Libya and had reached the city of Tobruk on 22 February 2011, "the protest movement is no longer a protest movement, it's a war. It's open revolt." Wikipedia
1979 - Energy Crisis
The 1979 (or second) oil crisis in the United States occurred in the wake of the Iranian Revolution. Amid massive protests, the Shah of Iran, Mohammad Reza Pahlavi, fled his country in early 1979 and the Ayatollah Khomeini soon became the new leader of Iran. Protests severely disrupted the Iranian oil sector, with production being greatly curtailed and exports suspended. When oil exports were later resumed under the new regime, they were inconsistent and at a lower volume, which pushed prices up. Saudi Arabia and other OPEC nations, under the presidency of Dr. Mana Alotaiba increased production to offset the decline, and the overall loss in production was about 4 percent. However, a widespread panic resulted, added to catastrophic decisions like U.S. President Jimmy Carter ordering cessation of Iranian imports to the U.S., driving the price far higher than would be expected under normal circumstances. Wikipedia
2011 - Energy Crisis?
The Time columnist Robert Baer had a source close to the Libyan regime telling him that Gaddafi has ordered the destruction of oil pipelines, cutting off flow to Mediterranean ports.
"There's been virtually no reliable information coming out of Tripoli, but a source close to the Gaddafi regime I did manage to get hold of told me the already terrible situation in Libya will get much worse. Among other things, Gaddafi has ordered security services to start sabotaging oil facilities. They will start by blowing up several oil pipelines, cutting off flow to Mediterranean ports," Baer wrote.
The worsening violence in Libya and the continued uncertainty in Bahrain have sent shockwaves through world oil markets, and prices have started going north in anticipation of supply breakdowns. Crude prices spiked up around seven percent on Tuesday morning in New York, inching towards two-year highs.
The political crisis in Libya, which is Africa's third-largest oil producer, has already forced many oil companies to halt production and exports.
Observers think Gaddafi's message to the Libyans and the rest of the world is that once he is gone, the country will slip into anarchy, and one major fallout would be energy supply disruptions in the Middle East. IB Times
History doesn't repeat itself, but it does rhyme - Mark Twain
Just like the financial crisis continued to pop up in different locations, such as the movement to firefight issues in Iceland, then Dubai, then Greece, then Ireland (and there are many others on the brink that I have not listed), so has the political instability in the Middle East and Northern Africa flowed from one location to the next.
From Tunisia, to Egypt, then Bahrain, Libya & Yemen (to name but some of the locations we've seen mass protests and revolution).
Where does this stop?
Gold is not always an inflation hedge, 1980 to 2000 is proof of that.
Gold is not always a deflation hedge, 2008 is proof of that.
Gold is a crisis hedge. It thrives in an environment of financial and/or geopolitical instability.
The world stands on a precipice and there is a lot of uncertainty about where things head from here.
2008 saw the US Fed bailout the world and pull us back from that precipice, but printing dollars is not going to solve the world's political problems and it could be argued that the printing has in fact fueled the current Middle East revolution.
I talk a lot about Silver on this blog, reality is though I wouldn't have started playing the Silver trade without first having a decent position in Gold.
On January 3rd 1978, Gold's London PM fix was $169.20, on January 21st 1980, a short 2 years later, Gold traded at $850 (a 5x multiple of $169, price data from Daily Gold). If we saw a similar rise in Gold in the short term it would take the price from $1400 to $7000.
In my opinion we are heading into the 3rd and final phase of this bull market (as previously discussed on the blog, here). Not only could we see similar gains to those seen in the 3rd phase of the 1970s bull market (over the final 2 years), but the catalyst for sending the price soaring could be similar in nature to that of the 1970s.
Just like the bumper sticker says:
Get in, Sit down, Shut up, Hold on!
Disclosure: Positions held in Gold & Silver. Not investment advice. Do your own research.