Weekly Digest: Bank Failures, Gold on the Rise


4 minutes read

Mar 17, 2023

The Silicon Valley Bank Building

18/03/2023: Markets reeling from a sudden collapse of several banks, gold poised for the best week since mid-November, ECB hikes rates again. And more.

💡Quote of the week

“If people don’t want their money in a bank, gold & crypto are classic places to be, especially with the ongoing threat of further bank runs.” Nicky Shiels, Metals Strategist, MKS PAMP

Investment news

The US Federal Reserve building

🏦 Stunning bank failures. Cash-strapped U.S. banks have borrowed about $300 billion from the Federal Reserve in the past week. Almost half of the money - $143 billion - went to holding companies for Silicon Valley Bank (SVB) and Signature Bank, putting financial markets on edge. (Wall Street Journal)

The Fed didn't say which banks got the other half of the funding. The Federal Deposit Insurance Corporation (FDIC) set up holding companies for the two failed banks. The FDIC has taken over both banks and utilized the borrowed funds to pay off their uninsured depositors. Crypto-focused bank Silvergate said last week it would also have to shut down its operations.

In the wake of SVB and Signature Bank failures, many bank customers are probaly asking: “is my money safe?”

🇨🇭 🏦 To the rescue. Switzerland-based bank Credit Suisse said it would borrow 50 billion Swiss francs (€50.7 billion, $54 billion) from the country's central bank in a move meant to boost its liquidity and deposit reserves. (Press release)

“Credit Suisse announces its intention to access the SNB’s Covered Loan Facility as well as a short-term liquidity facility of up to approximately CHF 50 billion in aggregate. This additional liquidity would support Credit Suisse’s core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs,” the bank said in a press statement.

📈 Bank lifelines eased crisis fears. European markets were trading higher on Friday, thanks to the recent financial help received by Credit Suisse and First Republic Bank, easing fears of a crisis in the banking sector. (CNBC)

The pan-European Stoxx 600 index went up 0.8%, with most sectors trading in positive territory. Oil and gas stocks led the rally with a 2.8% increase, followed by mining stocks, which were up 2%.

⭐Gold poised for the best week since mid-November. Boosted by a weaker dollar, gold made its biggest weekly gain since mid-November on Friday as investors sought safe havens amid a global banking crisis.

The gold price was up 0.7% at $1,931.90 an ounce this week, heading for a third consecutive weekly gain.

🇪🇺 ECB’s new rate hike. The European Central Bank has raised interest rates across the Eurozone by 0.5 percentage points, despite market mayhem and fears that higher borrowing costs could set off a domino effect across a banking sector. (CNBC)

“The Governing Council is monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability and financial stability in the euro area. The euro area banking sector is resilient, with strong capital and liquidity positions,” the central bank said in a statement.

🇺🇸 U.S. inflation. The consumer price index rose 0.4% in February and 6% from a year ago, in line with market expectations. (CNBC)

“Even amid current banking scares, the Fed will still prioritize price stability over growth and likely hike rates by 0.25% at the upcoming meeting,” said Jeffrey Roach, chief U.S. economist at LPL Financial.

📸 Image of the week

A meme mocking bank behavior amid the current banking crisis


Credit Suisse global bank building

🤔 Crisis? What crisis? “A hard look at share prices show this is more a moment of dilemma than disaster. And then, there’s that one bank that’s clearly too big to fail.” (Bloomberg Opinion)

“The frightening news about Credit Suisse is that it is quite obviously too big to be allowed to fail. It is so large and so interconnected with the global financial system that a collapse would surely create an all-out systemic crisis. The good news about Credit Suisse is also that it so clearly too big to be allowed to fail,” Bloomberg’s John Authers writes.

What else is happening

Russian jets crossing the blue sky

💥 On a collision course. A Russian fighter jet collided with a U.S. surveillance drone over the Black Sea on Tuesday, causing U.S. forces to bring the drone down in international waters. The incident, which the US military described as "reckless, environmentally unsound, and unprofessional," has heightened tensions between NATO and Russia. (Euronews)

In response, the US summoned Russia's ambassador to express its "strong objection," while Russia's ambassador justified the actions of the Russian pilots. The incident comes amid regular interactions between drones and aircraft from NATO countries and the Russian armed forces over the Black Sea.

📱 No, seriously, we’re not spies. The Biden administration has threatened to ban TikTok in the United States unless the company’s Chinese owners divest their stakes in it, citing fears that US user data held by the company could be passed on to China’s government. (The Guardian)

This move follows a global backlash against the app over concerns about the potential for Chinese spying, with countries including the U.K., Canada, and Australia banning the app from government phones. TikTok, however, denies these allegations and has spent over $1.5bn on data security efforts.

And finally…

A hand holding a phone with letters ChatGPT

🤖 GPT-4 is here. ChatGPT creator OpenAI unveiled new GPT-4 AI system, setting off an intense competition among tech companies in the area known as generative AI. (Bloomberg)

OpenAI said the tool is “40% more likely to produce factual responses than GPT-3.5 on our internal evaluations.”


See you next week!


Buy gold - buy silver


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