The Dow Jones dropped over 400 points in early trading to start the week, on renewed fears of a heightened trade war. The European Union began its implementation of tariffs on $3.2 billion of US imports on Friday. President Trump responded by threatening a 20% tariff on imports of European cars, and an insistence that any tariffs or barriers to trade would be met with full reciprocity by the United States. President Trump is also expected to announce new barriers to Chinese companies investing in US technology firms.
That the threat of trade war has escalated from back and forth saber rattling to actual implementation is worrying. But if no one on any side is willing to back down then the likelihood of a hardening of positions grows ever more certain. And that would be incredibly bad news for businesses around the world.
While markets had been in a wait-and-see mode for the past several months, the reality of the situation is readily becoming apparent, so stock markets should continue to see more declines throughout the summer. But what’s bad for stocks should be good for gold.
The gold price is currently trading at its lowest prices of the year, making it a great buy for those who missed out on it earlier. Gold’s price increased 13% last year and it is poised to break out this year. It’s all a matter of when, not if, since gold normally performs well when stock markets don’t. As markets continue to deteriorate, more and more investors will flock to gold.
The only thing keeping gold in check right now is the continued hope that the economy will continue to grow, that stocks will continue their meteoric rise, and that the trade war will end before it has barely begun. As investors begin to realize that their hope is misplaced, they will realize the errors of their ways and increasingly look to gold as a safe haven.
This article was originally posted on Goldco.
