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Saudi Arabia just threatened to crash the U.S. bond market… send the dollar plunging… and wreak havoc on equity markets worldwide.
The New York Times reports the kingdom is ready to liquidate up to $750 billion in U.S. Treasuries. The Saudi foreign minister made the threat last month in a visit to Washington.
It came after Congress began considering legislation over potential Saudi involvement in the 9/11 terrorist attacks. A bipartisan bill would allow victims’ families to sue the kingdom for any material support its citizens or officials provided the attackers.
The Saudis promised to dump their U.S. bonds if the bill becomes law.
The Saudi plan is “MAD” (“Mutual Assured Destruction”)…
There’s no way the Saudi regime could do this without destroying itself in the process. The more bonds it sells, the lower the price of the remaining Treasuries it has yet to liquidate. The kingdom can’t exit such a large position unscathed.
Plus the world would denounce the Saudis for destabilizing the global bond, equity, and currency markets.
The situation reveals how dire things have become for the Saudi regime. They wouldn’t consider such a radical move unless they faced an “existential crisis.” And they are…
Bottom line: The Saudis’ “liquidation threat” is unlikely… but far from impossible. It’s another important reason we own gold as “wealth insurance.”
If the Saudis dumped bonds, gold would skyrocket… as the entire world scrambled to find a safe haven in the volatility.
Stay long gold. Review our recommended gold allocations right here.
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