As the anticipation for a US and China trade war continues, market participants are beginning to plan accordingly. As initially reported by Bloomberg, investors are starting to flock to gold as holdings in all bullion-backed exchange traded funds is at its highest level since 2013.

The bullion-backed exchange traded funds have risen for four straight days which is the longest run since January. As a side note, the third largest commodity-linked ETF (Xetra-Gold) now has 177 million shares outstanding, which is the most since the fund started trading in 2007.

Other notable gains from gold ETF’s include:

China’s Bosera Gold ETF which is on track to see its most significant returns since being listed in 2014. The ETF has added $610.8 million this year. Also, iShares Gold Trust ETF has seen the addition of $1.49 billion in 2018.

Clearly, the market is beginning to price in a trade war between two of the world ’s largest economies, and many fear the aftermath could be rampant inflation.

Most notably, the head of world’s largest hedge fund Ray Dalio recently laid out his concerns about this trade war on LinkedIn:

I’m worried and forced to look harder at the question of where Donald Trump is leading us. What is his real agenda? Right now, I don’t think it’s clear to anyone, including some of the people closest to Donald Trump, what exactly his strategic objectives are – Ray Dalio

Dalio has also issued his concern with the fact that China could retaliate with its $1.2 trillion of U.S. Treasury bonds.

If China begins to unwind its treasury position then interest rates would be pushed much higher, so not only is Dalio worried about a trade war he signed off by warning about the potential for a “capital war.”