Rick Rule Sees Gold Reaching US$1,400 if Trade War Breaks Out

The gold price could hit US$1,400 per ounce, reaching its highest level in five years, if a trade war breaks out, Sprott US Holdings CEO Rick Rule told Bloomberg.

Rule said gold could receive a boost as escalating trade tensions drive investors to safe-haven assets and the three-decade bull market in bonds nears an end.

Trade war fears have increased since US President Donald Trump imposed tariffs on aluminum and steel and ordered at least US$50 billion worth of tariffs on Chinese imports.

In response, China imposed its own levies on US$3 billion in imports of US goods on Monday (April 3), fueling investors’ worries and boosting demand for gold.

“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 US dollar and in particular, the US dollar as expressed by the US 10-year Treasury,” Rule said.

“The fact that the US 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 US. The potential for a winnerless trade war certainly gives cause to some concern,” he added.

According to Rule, the aggregate federal, state and local debt in the US, both on balance sheet and entitlements, relative to levels of savings and investments in the economy, will contribute to worries over the longer-term purchasing power of the US dollar, particularly in view of low current yields.

Other experts also expect the gold price to increase in the long term, such as Rob McEwen of McEwen Mining (TSX:MUX,NYSE:MUX), who is well known for his US$5,000 call, and John Kaiser of Kaiser Research who thinks the yellow metal could climb as high as US$1,600 to US$2,000 this year.

Even Goldman Sachs (NYSE:GS) has turned bullish on gold for the first time in half a decade. The bank expects gold to outperform in the coming months on the back of rate hikes, an uptick in inflation and an “increased risk” of a stock market correction.

As of 2:00 p.m. EST on Tuesday (April 3), gold was trading at US$1,336.40 per ounce.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.