Oil and gold are performing very well today on the back of some dramatic news and events in the North African nation, and member of the Arab League, Libya. Unlike Egypt, Yemen, or Tunisia, Libya is an important oil exporter, and plays a significant role in the OPEC even if its influence and point of view do not always coincide with those of the consumer nations. Reports arrive of up to 300 people being killed in the major Eastern port city of Benghazi, where the Libyan Army and security forces are understood to have clashed with protestors following orders of the country`s corrupt and brutal dictator Muammar al-Gaddafi. Interestingly enough, the dictator seems to prefer presenting his son Saif al-Islam Muammar al-Gaddafi as the new face of the regime, delegating the job of giving interviews and making announcements to him, perhaps in a hint that he recognizes the people`s frustration at seeing him as the unchanging head of state of the country since the late 1960s when long distance air travel was the main theme of stock markets and the global economy.

Most western and Arab news sources are actually barred from reporting from inside the country, but various pieces of information suggest a degree of fracturing in the regime`s structure, with various sections of the army and the civil service openly backing the cause of the demonstrators in a series of comments since last Friday. It is beyond doubt that al-Gaddafi is different from any other of the previously toppled leaders, since his relations with the West are of limited significance for the survival of his regime, and the role of Western support and aid is of little sigificance for the country`s economy. It is hard to see how, at a time of great pressure on oil prices, the West could endorse an embargo on Libya. In consequence, we would assess the chances for the al-Gaddafi regime as being balanced, on the premise that it will not be too restrained in using force with maximum effect and brutality against its own people if it deems such actions necessary for survival. Nonetheless, the frustration and anger of past decades is acute and fervent, and could well sweep away the dictator`s power machine in its waves.   

Protests are reported to be continuing with varying intensity in Bahrain, Iran, Yemen, and other nations. Reports come even from China, where authorities are doing their best to monitor and prevent what they deem to be disruptive activities among the country`s disorganized opposition. Global stock markets, meanwhile, were mostly unchanged or in the red through much of today`s Asian and European sessions, as traders maintain cautious optimism against strong headwinds. Commodity prices, and in particular food, oil and gold prices seem to be overextended, but we do not envision a reversal until perhaps mid to end of Q2 this year, as the short-term, secondary bubbles that have been building up since the past year or so have some room to run before they experience a sharp correction. We would not be surprised to see gold break another record, and oil touch above $100 per barrel once again, before Chinese and EM interest rate rises lead to a sharp correction.