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Gold Is Heading to $1,400 If Trade War Breaks Out, According to Sprott

Gold will surge to the highest level in five years if a global trade war breaks out, according to Rick Rule, chief executive officer of Sprott U.S. Holdings Inc., who’s been involved in the market for four decades.

Bullion could top $1,400 an ounce in 2018 as escalating trade tensions drive investors to havens and the three-decade bull market in bonds nears an end, said Rule, who’s due to speak at a conference in Hong Kong on Wednesday. Spot gold traded at $1,337.50 Tuesday after three straight quarters of gains, while exchange-traded fund holdings are around the highest in half a decade.

President Donald Trump has ordered import tariffs on steel and aluminum and sought new restrictions on Chinese investment. Asia’s top economy retaliated by imposing its own levies on Monday, while the U.S. is expected to release this week a new list of Chinese products to be slapped with duties. A trade war could crimp demand for U.S. assets just as the budget deficit swells, with the dollar vulnerable should international buyers shun American debt.

“In the 40 years I’ve been involved in the gold market, the most important determinant of the gold price has been international confidence in the U.S. dollar and in particular, the U.S. dollar as expressed by the U.S. 10-year Treasury,” Rule said in an interview March 29. “The fact that the U.S. seems to be bound to engage in a zero-sum trade war has begun to strike people as something that’s bad for everybody in the world, not just the U.S. The potential for a winnerless trade war certainly gives cause to some concern.”

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MARKET SUMMARY

INDICES

Name Last Change
DOW 24352.60 0.45%
S&P 500 2660.21 0.37%
NASDAQ 7100.15 0.65%
TSX 15547.95 0.41%
TSX-V 799.02 0.00%

Resource Commodities

Name Last Change
Gold 1324.34 0.85%
Silver 16.65 2.88%
Copper 3.13
Platinum 919.50 0.56%
Oil 68.38 0.13%
Natural Gas 2.74 2.88%
Uranium 24.25 N/A
Zinc 1.47 0.00%

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