Money continues to pour into gold as tensions rise
Last Sunday, North Korea launched its most powerful missile yet in an ongoing display of military strength. The launch of a supposedly advanced hydrogen bomb prompted a stern response from the U.S. military, and U.S. Defense Secretary Jim Mattis told the public that Trump was interested in all available military options.
Author James Rickards, who was the principal negotiator of the 1998 bailout of Long-Term Capital Management, sees this as a major risk. As stated in a recent Newsmax article, Rickards says the risk of nuclear war is higher than some realize: “People seem to have very short attention spans. I’m just looking down the road and you can see the war is coming.”
Rickards believes this will continue to provide a major leg up for gold, as the metal thrives in times of uncertainty and conflict – after recently breaking $1,350, Rickards says the metal could go up to $10,000 an ounce.
“The bigger picture, the one I’m looking at, is that gold hit an interim low on Dec. 15 and it has been grinding higher ever since. It’s one of the best performing assets of 2017,” he explained.
Money continues to pour into gold as tensions become harder to ignore, although many believe there’s room for a lot more buying. Tom Kendall, head of precious metals strategy at ICBC Standard Bank, sees the metal going past its current highs: “We’ve got the geopolitics and we’ve also got a fairly benign interest rate environment. There’s still nothing threatening coming out of the Fed recently.”
The article states that war isn’t the only risk coming from Trump’s White House, as the President is expected to push for harder sanctions on Chinese banks that continue to collude with North Korea. While retaliation from these banks in the form of dollar devaluation would be a major issue, it’s actually something that Trump has long been calling for, believing that an overvalued dollar continues to hurt U.S. trade.
Because of this, as Newsmax editor Andrew Packer explains, Trump isn’t likely to back down from sanctions on large Chinese banks due to the possibility of a foreign reserve sell-off, which would significantly benefit gold.
“When you consider both the likelihood of more downward pressure on the U.S. dollar resulting from the North Korean, Chinese, and U.S. political concerns, and the Federal Reserve’s sluggish action on raising interest rates, the upside for gold looks very likely,” said Packer.
“I’m expecting gold to rally and challenge the $1,500 resistance level sometime in 2018. And I wouldn’t be shocked by a run that brings it to $1,750 by the end of next year.”