It seems that a week doesn’t go by without some news about North Korea and its latest nuclear or ballistic missile test. In a self-defensive move South Korea announced they will upgrade their conventional and bomb capabilities in response to North Korea’s aggressive behavior. Heightening the tensions, China declared it is preparing for a conflict along its border with North Korea. Rather than trying to lessen the tensions, North Korea does the only thing it seems to know how to do – that is – test another long-range Intercontinental Ballistic Missile.
South Korea Feels the Heat
The past response of South Korea during North Korean provocations has been calm and continues to carry on with everyday activities. However, this past week it appears their limit has been reached. The Seoul government announced that it will increase its conventional ballistic missile armaments which will include powerful one ton conventional ballistic warheads. North Korea has a considerable missile arsenal and the display by South Korea appears to still have it lagging behind its northern neighbor.
National security experts have estimated that North Korea has about 1,000 different ballistic missiles, which is considerable firepower. It is thought that some of these missiles would inevitably reach Seoul in addition to other military and civilian targets in case there were a conflict. Even though there are placements of several U.S. THADD missile defense batteries there is still the inevitability that some of the North Korean missiles will find their target, especially if North Korea decided to fire huge salvos of missiles at the south. Despite these sobering realities, South Korea views the inclusion of these new ICBMs with the heavier payloads as an essential element to defending themselves from North Korea. This perspective is provided by the Yonhapp news agency of South Korea.
The missiles were previously restricted to half-ton payloads with a 500 mile range according to a 2012 agreement between the United States and South Korea. The larger one ton warhead will give South Korea a greater amount of retaliatory power against an offensive move by North Korea. The co-founder of a Washington D.C. based think tank, 38 North, commented:
“That could double the amount of conventional explosives on top, which would allow them (South Korea) to destroy some targets that they currently can’t destroy. This includes destroying hardened targets like command posts and bunkers.”
There is also the specter of North Korea miniaturizing its nuclear warheads so they can be mounted atop ICBMs which have the potential of reaching the United States mainland. Joseph Dunford, Chairman of the Joint Chiefs of Staff, warned:
“They’re clearly on a path to develop an intercontinental ballistic missile that can reach the United States and to match that with a nuclear weapon.”
North Koreans Test Launch another Dangerous Ballistic Missile
On Friday, North Korea tested another long-range ICBM. It’s difficult to know the purpose of these tests. Whether it’s meant to demonstrate technological progress, position itself more positively during negotiations with the United States or to offer a foretaste of its military intentions is unclear. What is evident is that the danger to South Korea and even the United States is real. U.S. President Donald Trump condemned the latest tests on Twitter:
“Threatening the world, these weapons and tests further isolate North Korea, weaken its economy, and deprive its people. The United States will take all necessary steps to ensure the security of the American homeland and protect our allies in the region.”
After traveling 1,000 kilometers the test missile came down and splashed off the coast of Japan. There are very few viably attractive options left for the United States regarding North Korea that do not involve the entire Korean peninsula being decimated by war.
The Joint Chiefs of Staff for the South Korean military estimated that this most current missile launched by North Korea in July is more advanced version from the precious one launched in June. This second launch in July reveals the real danger in that it was a demonstration of North Korea’s quick advancement in technology. Their assessment was based upon the distance the missile traveled. A statement by the South Korean Joint Chiefs of Staff declared that:
“The altitude is about 3,700 km and the flying distance is about 1,000 km. It is estimated that it was a more advanced type of an ICBM compared to the previous one based on the range.”
The latest assessment this past Wednesday by the United States on North Korea’s progress emphasizes the heightened gravity of North Korea’s missile program. The U.S believes that North Korea will soon be capable of launching an ICBM with a dependable nuclear warhead by the first of 2018. Previously the West argued that there was a three to five year span in which the U.S. would have to react. That time for action is quickly diminishing.
Harry Kazianis, Director of Defense Studies at the Center for the National Interest warned:
“In all honesty, we should not be surprised anymore: North Korea is slowly morphing into a nuclear and missile power right before our very eyes. North Korea will continue to test over and over again its missile technology and nuclear weapons in the months and years to come in order to develop the most lethal systems it can. You can bet every time they do tensions will continue to rise. This is what makes the situation on the Korean Peninsula as dangerous as it is.”
There is no exaggeration on the part of Kazianis. In 2017 North Korea has so far completed 12 missile tests just since February. It has also engaged in its very first ICBM launch on July 4th that it claimed could reach “anywhere in the world.”
Kim Jong Un has tested a far greater number of missiles than both his father and grandfather put together, and he has only been dictator less than 6 years. A preemptive attack on North Korea is filled with difficulties. The greatest of which is North Korea’s probable retaliation against South Korea if the U.S. should attack.
China’s Preparation for War
You know things are serious when China beefs up their preparations for an armed conflict in the Korean peninsula. In the past few weeks China has increased its defensive capabilities on its North Korean border. These preparations are being made even as President Donald Trump contemplates military retaliation to North Korea’s hostile provocations. There are reports that the Chinese have increased their military drills on the border and transferred military units from other parts of the country to the border. In addition to this, the Chinese are taking other measures to ready themselves for an armed conflict.
Another Korean War Would Be a Disaster
Senior U.S. military officials have conceded that a renewed conflict in the Korean peninsula would be an absolute disaster for the Korean people. General “Mad Dog” Mattis in June told Congress that the United States is “exhausting all possible diplomatic efforts” in an effort to circumvent what will otherwise prove to be a “catastrophic war.”
This doesn’t mean that Mattis believes the U.S. would not win such a conflict, but sharing what the cost of victory will be. He is merely conjecturing that this potential conflict would represent “a war more serious in terms of human suffering than anything we have seen since1953.”
The Potential Effect on Gold Prices
As tensions rise on the Korean peninsula so will the price of gold rise. History bears out gold’s safe haven appeal in times of geopolitical tensions and war. Besides death and destruction, wars also means there will be an excessive amount of money printing and government spending will be accelerated. This generally means the stock market will decrease and when this happen, historically gold prices increase. Let’s review recent history.
During the 1970s we witnessed many regional upheavals. There was the Iranian Revolution in 1978, the Iran-Iraq war in 1979, the Soviet Union’s invasion of Afghanistan in and the Iranian hostage crisis, both of which occurred in 1979. During this period there was heightened activity in the price of gold. In 1977 the price of gold rose 23%, in 1978 it rose 37% and in 1979 the price of gold rose an incredible 126%.
During the first Gulf War gold prices soared again when Iraq invaded Kuwait in 1990. However, the price of gold soon returned to pre-war levels as talks of war continued. When the war was over gold prices softened even more and by 1991 they had reached pre-war levels. As deflation to hold, the price of gold continued downward.
After the attack on the United States on September 11, 2011 gold prices surged upward. This event was followed by the United States’ invasion of Iraq in 2003. Once again the result was that the price of gold moved upward. Once it was determined that the war was both short and successful gold returned to its prewar level.
Even when it was thought that the United States would intervene in Syria in 2014, gold prices soared.
So what is the lesson for all to consider as it relates to the potential North Korean conflict and retirement portfolios? Some may speculate on the prices of gold for a quick profit. Others may turn to a gold IRA for the purpose of diversification and stability. In either case, it’s important to understand geopolitical conflicts and how they affect your wealth. If your portfolio is heavily loaded with paper-based investments, you will most likely experience a severe drop in value. If you diversify a portion into a precious metals IRA then you will protect your wealth during conflicts like the one that seems to be brewing in the Korean peninsula.
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