SINGAPORE – Gold will surge to the highest level in five years if a global trade war breaks out, according to Rick Rule, CEO of Sprott US Holdings, who’s been involved in the market for four decades.

Bullion could top $1 400/oz 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 $1 338 on Tuesday after three straight quarters of gains, while exchange-traded fund holdings are around the highest in half a decade.

President Donald Trump has ordered import tariffs on steel and aluminum and sought new restrictions on Chinese investment. Asia’s top economy retaliated by imposing its own levies on Monday, while the US is expected to release this week a new list of Chinese products to be slapped with duties. A trade war could crimp demand for US assets just as the budget deficit swells, with the dollar vulnerable should international buyers shun American debt.

“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 US dollar and in particular, the US dollar as expressed by the US 10-year Treasury,” Rule said in an interview March 29. “The fact that the US 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 US. The potential for a winnerless trade war certainly gives cause to some concern.”

The aggregate federal, state and local debt in the US, 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 US Holdings is a subsidiary of Toronto-based Sprott, which had C$11.5-billion under management as of December 31.

An easing of the China-US trade row may damp bulls’ enthusiasm. China on Monday urged talks to prevent greater damage to relations, and repeated its position that disputes should be resolved with dialogue. Plus, the biggest US tax overhaul in years signed into law by Trump in December will provide more stimulus to the US economy and may curb the impact on the budget deficit.

BNP Paribas SA predicted at end-February bullion will probably be lower by the end of the year than the start, with four Federal Reserve rate hikes expected in 2018, while IHS Markit sees gold dropping to $1 200 by the year-end.