Gold Is The Clear Winner Of The Trade Wars
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(Kitco News) - As the trade war between the U.S. and China escalates, all eyes are on how the economy will respond, and one expert said that gold will come out as a beneficiary.
Gary Wagner, editor of TheGoldForecast.com, said that as the U.S. prepares to enact 25% tariffs on $200 billion worth of Chinese goods, gold could rally in the long-term due to the tariffs’ inflationary impacts.
“You have to look at what the tariffs will do in terms of consumer prices down the road. These tariffs are put onto the companies that are using those imports. However, they’re going to pass the additional costs back to the consumer,” Wagner told Kitco News. “So that means that the American consumer is going to be paying more, that would be inflationary, it would also set into motion the potential for a recession, but not necessarily a recession.”
Wagner noted that gold’s upward trajectory will be encouraged by side effects the tariffs will bring.
“There will be an increase in inflation, and we could see continued pressure on U.S. equities, and we could see gold be a recipient in terms of a bullish move,” he said.
On a shorter-term basis, gold still needs to test critical levels before an uptrend can be confirmed, Wagner said.
“The real key resistance, major resistance, comes in at approximately $1,310 [an ounce] to $1,311,” he said. “If [gold] does break on a closing basis above $1,311, the next real move is going to be n the $1,320s or $1,330s. The key high this year has ben $1,350, so that’s the absolute major resistance that comes in on a technical basis.”