If what we witnessed last weekend with the failure of Silicon Valley and Signature Banks turns out to be the beginning of a new banking crisis, then last week will be talked about for months, and possibly years to come. The Washington Post has reported that a study shows that 200 banks are in the same predicament that caused the largest and the second largest bank failures in history. Gold began the week at $1,867.00 and rallied $117.00 to $1,984.00 for a gain of 6% on the week. All eyes now turn to the Federal Reserve Meeting this week.
The markets have reportedly priced in a quarter point rate increase and anything else will certainly have to be digested by traders. In a weekend article, The Washington Times reported on a study by the Social Science Research Network that suggests 200 additional banks face the same fate as SVB and Signature. Last week Republic Bank in the U.S. was bailed out by private funds from four of the largest banks in the country while Credit Suisse in Zurich is courting a $54 Billion bailout from the Bank of Switzerland or a takeover by UBS.
Reports conclude the American people began removing money from small to midsize banks in droves for the safety of larger institutions. This transition is welcome news to stockholders of the mega banks as they become even larger. The final consideration is that of the administration’s decision to provide relief for all depositors of SVB and Signature regardless of FDIC limits.
The big winner in the Precious Metals Sector was Silver with a whopping 12% move for the week. Opening trading at $20.23 and closing out Friday afternoon at $22.61. Silver had steady growth from September through January until profit taking took over. The rally last week erased half of the consolidation of February and March as those priced out of the Gold market are scooping up the underpriced shiny metal. All of this occurring without any increase in manufacturing demand. Once the “not recession” runs its course and manufacturing demand couples with investment demand, the low 20’s for Silver will be a memory.
Despite the rosy picture being painted by the current administration, the economy is straining the checking accounts of the American people and interest rate hikes are obviously adding more pressure to the Treasury heavy portfolios of the banking system. If the exodus from small and midsize banks continues, the mega banks will become even larger as the bank runs take their toll on the little guys.
Those that have Precious Metals in their portfolios obviously are aware of the inverse correlation between Gold and Silver and traditional investments. If the past week is any indication of things to come, the long-awaited momentum in the commodities sector is upon us Precious Metals dealer report a massive increase in sales and interest. This is largely due to runaway inflation and banking sector weakness. Throw in the fact that this inflationary period has been caused by an economy trying to digest $21 Trillion dollars of M2 money supply, what will happen when the 300 pound Gorilla in the room begins to pound his chest.
With foreign nations dropping the US Dollar for oil purchases, it is not necessary for Global Central Banks to maintain US Dollar reserves. When those 12 Trillion Greenbacks find their way back stateside, the problem will continue, or become exasperated. Always listen to Gold when making decisions about your money. If history is correct, Gold’s forecast is one we can count on.
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