Sprott's Rule: Trade War Will Drive Gold Over $1,400

Rick Rule, CEO of Sprott U.S. Holdings, and a commodity veteran who has been in the market for over 40 years, thinks a trade war could finally push gold over the $1,400/oz. level, Bloomberg reported this morning

One of the biggest surprises throughout the last couple months of stock market volatility has been the lack of a serious and consistent bid underneath the spot price of gold. Traditionally, investors will flock to gold as a hedge against the system or hedge against inflation but, even as the VIX has spiked several times over since the beginning of 2018, gold has yet to find a serious inconsistent bid.

Experts in precious metals like Peter Schiff have predicted that $1400/oz for gold will catalyze a breakout. For gold spot, it has certainly been a struggle to gather any momentum on a consistent basis over the last couple of months.

However, Bloomberg published a report early this morning citing Rick Rule, who believes that $1400 per ounce could easily happen if the US is put into a trade war situation that it is increasingly looking like we are getting near:

Gold will surge to the highest level in five years if a global trade war breaks out, according to Rick Rule, chief executive officer of Sprott U.S. Holdings Inc., who’s been involved in the market for four decades.

Bullion could top $1,400 an ounce in 2018 as escalating trade tensions drive investors to havens and the three-decade bull market in bonds nears an end, said Rule, who’s due to speak at a conference in Hong Kong on Wednesday. Spot gold traded at $1,337.50 Tuesday after three straight quarters of gains, while exchange-traded fund holdings are around the highest in half a decade.

He then said that "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 U.S. dollar and in particular, the U.S. dollar as expressed by the U.S. 10-year Treasury," according to a March 29 interview.

"The fact that the U.S. 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 U.S. The potential for a winnerless trade war certainly gives cause to some concern." Some more of Rule's considerations:

The aggregate federal, state and local debt in the U.S., 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 dollar, particularly in view of low current yields, Rule said. Rising income and savings in Asia, a region with a disposition for gold buying, could also lead to more demand, he said. Sprott U.S. Holdings is a subsidiary of Toronto-based Sprott Inc., which had C$11.5 billion ($8.9 billion) under management as of Dec. 31.

It is obvious that Rule's reasoning for a potential sharp rise in gold is far more centered around inflation and a potential loss of confidence in the dollar than just overall stock market volatility.

As we discussed two weeks ago, the "decision point" for gold could be forthcoming and the demise of the dollar could finally be on the horizon: Russia and China are increasing their reserves and the US dollar is backed by nothing but "confidence" and $123 trillion in debt:

Other countries are now faced with a choicewhether to keep and to add to their gold reserves or hold on to the dollar, which is backed with $123 trillion in debt.

China and Russia aren’t the only countries increasing their gold reserves. The Hungarian National Bank (“MNB”) has 3 tons of gold, valued at $130 million, stored in London. It has decided to return this gold to Hungary. Other countries are following Hungary’s example as they restore and replenish their gold reserves. Germany’s Bundesbank has recalled $28 billion of their gold reserves formerly stored in New York and Paris.

Is the US getting nervous? US Treasury Secretary Steven Mnuchin made an almost unprecedented and very public visit to Fort Knox, where $200 billion worth of gold is stored. “It’s still here,” Mnuchin joked. Or was he simply relieved? Gold has is becoming more important globally than ever. We may see another “gold rush,” and that does not bode well for the US dollar.

 

A couple things are certain: with each passing day we get closer to that critical test of how much global confidence there truly is in the reserve currency; meanwhile this 40-year market veteran's opinion is worth considering and it now appears that for Gold bulls the $1400 level will be critical; once it breaks, it could well be the catalyst that unleashes the demand that pushes gold back on the path toward its all time highs.

Comments

RAT005 whatswhat1@yahoo.com Tue, 04/03/2018 - 15:40 Permalink

TPTB either have control of PM prices or they don't.  Until they don't, prices don't go up.  This got aggressive in early 2013.  Who would have guessed it would continue for 5 years?  Maybe it lasts 5 more years.  The discussion should be evaluating TPTB strength.  Discussing PM price is kind of useless.  So where is TPTB strength coming from and is it getting stronger or weaker?  If it is getting weaker, how long before they lose their hold on PM prices.  Look where the dollar was vs. Gold and Silver Superbowl weekend for instance.  Just since then, the loss in value of $US should have silver at $18.  Instead, useless noise talks about $16.30 being up almost $1 from recent low.

In reply to by whatswhat1@yahoo.com

Coinista RAT005 Tue, 04/03/2018 - 15:41 Permalink

Oh, puhleeease, old-bugs.  You just keep coming back for more monkey hammering week after week. Excepting the ancient of you with nothing left of your mental faculties, you should be switching to Bitcoin for real currency and wealth preservation.  Toss aside your jealous loser ways for the good life.

BUY BITCOIN!! Losers.

In reply to by RAT005

FIAT CON Buckaroo Banzai Tue, 04/03/2018 - 18:20 Permalink

Why is it that people always refer to owning 1 item for wealth/life  protection and not being diversified?

I own Gold, Silver, Gun's, lots of ammo, and dry power and lead to reload just in case, Lots of canned food, garden, HD security cameras to monitor what's happening around my home, cash, stocks, tools coming out of my ying yang and the knowledge to fix almost anything, solar panels, Hot water heating panels, fishing gear, boats (live 1000 yds from good ocean fishing) , bow and arrow for silent killing, I even ranch deer for food just in case. ALL of my Friends want to come to my house if TSHTF. 

Don't ever put all your eggs into one basket!

In reply to by Buckaroo Banzai

Theosebes Goodfellow Buckaroo Banzai Tue, 04/03/2018 - 19:49 Permalink

~" If there's an EMP and total nationwide grid-down scenario for longer than three weeks, forget your BTC or your gold or pretty much anything else you own, or think you own."~

If there's an EMP, yes, everyone is fucked. It's just that some folks are more fucked than others. I live in rural Tennessee. I've got solar, jennies, a still, a wood stove and about 6 ricks. Also, All of my seeds from Johnny's, West Coast Seeds, Jung, Burpee's and Baker's just got here. As Bocephus sings, a country boy can survive.

As far as BTC, it's value is extremely variable. It does some very cool things as far as being able to move money between countries without governments knowing, but I think you are wrong about gold, and to a greater extent, silver. Gold is "big money", silver is extremely pedestrian, and I say that in a complimentary way.

~" You'll be lucky to get out of it with your life."~

Last I heard, we ain't getting out of this life alive, or so the word on the street is. Me, I'm living for ever or dying in the attempt. YMMV. :-)

In reply to by Buckaroo Banzai

east of eden Coinista Tue, 04/03/2018 - 16:50 Permalink

I traded a lot of bitcoin and alt-coins over the last two years, and it really helped my annual income, HOWEVER, the PTB (i.e the fucking Fed, JPM, GS and the other assorted cockroach jews) now have it completely under their control so you can forget about even coming close to keeping pace with inflation. They are well on the road to robbing you, and I, blind.

As a matter of fact, you can forget about your pension. You can forget about feeling safe in your home. You can forget about travelling anywhere. You can forget about your children having any chance. You can forget about eating healthy food, and you can forget about having anything other than the clothes on your fucking back, unless and until the fucking jews are deported back to Israehell. Let the Arabs deal with them.

Satanic fucking jews. Smiling camel's asses from S.A.. Pathetic, weak and captured leaders in the British Parliament and the US Congress. Germans who don't know where they really belong, delivering poisons to help us 'grow our production', and every manner of idiot consumed by the 'willful ignorance' phenomenon, and what do you have? A world in total disarray.

The sooner we start hanging these fucking bastards, the better. May needs a white hot piece of steel shoved up her worthless cunt, and Boris needs to be put into irons, in public squares, as an example to our children on what NOT to strive to be.

In reply to by Coinista

Give Me Some Truth RAT005 Tue, 04/03/2018 - 16:02 Permalink

You are so right. It’s either rigged or it’s not. If it IS rigged, why in the hell would they stop the rigging now?

With this exponential money printing, I’m sure that capping the precious metals has NEVER been more important. 

... No, they won’t stop. They CAN’t stop.

I like the way you framed your points. What might change that would make them stop (or would render their efforts at manipulation moot?)

China playing the gold card is the most plausible answer to me.

In reply to by RAT005

RAT005 Give Me Some Truth Tue, 04/03/2018 - 16:24 Permalink

Proving 9/11 was an inside job is easy.  Any of a half dozen facts make it certain. They waited too long after the "plane" to blow the building so there is too much evidence to hide the truth.

PM manipulation shows in a lot of little things that eventually can't be denied.  It's a much tighter story.  I actually think they are printing the charts.  Tech Analyses used to work 10+ years ago when humans were trading.  It was basically numerically quantifying human behavior.  Now I think the bots are printing the charts to create TA patterns used to publicize "weakness" in PM.  Printing fiat, naked shorting, not delivering, means they have total control.  And if they control GLD, Comex, and LBMA, each reinforces the other.  There's no denying, at the retail level you can buy all you want at these prices.  On and off backwardation doesn't seem to mean anything.  Mine production going down doesn't mean much.  Slow delivery to repatriate means nothing.  Bars returned with the wrong markings, no audits, gold stolen from small weak countries......it's amazing.

A random idea is that manipulation keeps price down for China's benefit as a means to settle trade imbalance.  We print fiat to buy their stuff, they trade useful stuff for worthless paper, they don't get mad because under the table gold is manipulated lower for them to accumulate at a discount.  Maybe there is a quota for them that will end the manipulation.  Maybe when the manipulation fails a war will start because we can't make good to keep living with our printed fiat.  Who knows?

In reply to by Give Me Some Truth

FIAT CON Give Me Some Truth Tue, 04/03/2018 - 18:30 Permalink

Sooner or later even the sheeple will realize "Gold Is Money, Everything Else Is Credit" JP Morgan

Under the right circumstances this will be known.

 

https://i.imgur.com/XKsPZk1.jpg

https://i.imgur.com/XKsPZk1.jpg

https://i.imgur.com/9a15Z29.jpg

https://i.imgur.com/1Z6n21l.jpg

https://i.imgur.com/lkGkEmN.jpg

https://i.imgur.com/Hmi4XPV.jpg

https://i.imgur.com/4YnJc8y.jpg

I'm sure the above pics reassure the sheeple of how good fiat really is.... Coming to a country near you!

In reply to by Give Me Some Truth

Give Me Some Truth Justin Case Tue, 04/03/2018 - 17:16 Permalink

Alan Greenspan wrote an entire letter responding to a GATA allegation? Huh? Where is the letter? I read Avi’s column, he doesn’t put any quotation marks around some letter Greenspan allegedly wrote. These people (bankers) ignore Powell and GATA. They don’t engage with him in a transparent debate or exchange letters with him.

The same with JP Morgan in regards to all the allegations Ted Butler has made about this bank. No comment is always their “comment.”

Of course, they could sue him. Just as the Fed could, I guess, sue GATA if it is making statements that are lies or defamatory.

In reply to by Justin Case

RAT005 Justin Case Tue, 04/03/2018 - 18:49 Permalink

It's a difficult story to fully understand....I'd say that is part of the power of how it continues.  Understanding that the PM market is going down does not mean it isn't manipulated down.  I know people that were in Junior Mining annual stock meetings where the proof of stock ownership, just in the room, was more shares than were issued.  Naked shorting is part of the manipulation.  Rules that prohibit delivery are part of the manipulation.  Almost nobody can take delivery from Comex.  Almost nobody can take delivery from GLD.  Lack of audits is very suspicious.  Why does the "market" tolerate no audits, why doesn't the market care?  There were some convictions of traders caught printing "Morse code" into their trades to communicate to other traders that the gang was going short.  Why did other countries help hide USA shortage of gold just before Nixon closed the gold window?  How close to wiped out was USA gold supply in early 70's?  Is there really any gold left in USA gov. vaults?

End of 2012 the gold mining industry valued gold at about $1550 as bottom of market value.  The fall from $1900 to $1600 could be called an honest correction.  From $1500 to $1100 was manipulation.  The cap now is manipulation.

In reply to by Justin Case

silver140 RAT005 Wed, 04/04/2018 - 00:44 Permalink

I agree with most of your argument. Still a bit hazy about the idea that TPTB behaviour is based on "strength". I don't think the price manipulation using paper gold traded in an imaginary "market" will ever be stopped. The corporate fascists couldn't let that happen. The real gold price will be determined when gold dealers and people saving or using gold know that the paper price is unreal, or maybe even anti-real, so that real gold will be priced according to scarcity in any particular area of the planet.

In reply to by RAT005