With President Trump’s revelation that he intends to place tariffs on all imports of Chinese goods, markets went haywire earlier this week. While tariffs on existing imports are rising to 25%, all Chinese imports will soon be subject to punitive tariffs. That will raise the cost of living not just for American consumers but for American businesses as well. With that money essentially being a tax for purchasing Chinese goods, Americans of all stripes will end up spending more money and receiving fewer goods.
The realization that the trade war is not coming to an end but is rather ramping up and intensifying has markets and investors nervous. Along with a 600-point drop in the Dow Jones, gold shot up as investors sought the safe haven of the yellow metal. That wasn’t a freak occurrence, and gold is likely to continue increasing in price in the future as the trade war worsens, stock markets weaken, and investors get even more nervous about the direction of the economy.
Gold demand was already up last year, driven by European investors and their fears with regard to the European economy. Now that the US economy could see weakness as a result of the trade war, it’s time for American investors to turn their sights to gold. And don’t forget Chinese investors either. Chinese gold buying is rapidly catching up to the West as more and more Chinese also look to protect their wealth by investing in tangible assets that hold their value in the face of financial turmoil.
With every indication that the trade war with China won’t be resolved anytime soon, and with the additional possibility of a shooting war in the Middle East due to heightened tensions with Iran, expect more and more investors to get into gold, driving the price up even further. Analysts at the beginning of the year were expecting gold to reach $1,450 later this year, but if things keep developing at this pace that might even be a conservative estimate.
This article was originally posted on Goldco.
