BBI INFO
1. The steep decline in U.S. bond rates and the subsequent flight to safety both contributed to an increase in the price of spot gold, as discussed in the preceding market overview. Having risen by more than $33 to a high of $1,937.28 per ounce, it eventually settled up 0.78 percent at $1,918.73. The price of silver on the spot market crossed back over $22 per ounce several times throughout the day, eventually settling at $21.78 per ounce, an increase of 0.45%.
2. the Swiss government has promised to bail out Credit Suisse if it runs dry.
To defuse the situation, Credit Suisse sought assistance from the Swiss National Bank. Credit Suisse has been denied any further help from its biggest stockholder, the National Bank of Saudi Arabia. Add more money to the pot. The Swiss National Bank stated that there was no evidence to suggest that events in the U.S. banking sector posed a direct spillover risk to Swiss (financial) companies, and that Swiss officials would provide cash to Credit Suisse if required. The Federal Reserve is currently reviewing Credit Suisse’s risk alongside the United States Treasury. The American financial behemoth has been cutting its ties with Credit Suisse for a while now. In an effort to limit its counterparty (risk) exposure to Credit Suisse, BNP Paribas ceased receiving credit-linked exchange reports. Credit Suisse credit default swap rates reach levels last seen during the 2008 financial crisis.
3. The collapse of two regional banks in the United States in the past week has caused wider financial upheaval, and Nick Timiraos, the “shadow official of the Federal Reserve,” recently noted that more investors now anticipate that the Fed’s interest rate increase cycle may be over.
4. Moody’s predicted that the Fed could call an emergency meeting if the stress on the financial sector persisted.
5. The U.S. interest rate futures market experienced an unusual circuit failure. Market participants are betting that the Fed will stop raising interest rates sooner rather than later. On Wednesday, the U.S. interest rate futures market was temporarily halted after a spike in futures values tripped a circuit breaker. The futures contracts for the federal funds rate in August and September, as well as the guaranteed overnight financing rate in June, July, and August, were all impacted by the halt in trading.
6. As of February, the monthly rate of retail sales in the United States was -0.4%, which was lower than the anticipated -0.3% and below the prior figure, which had been changed from 3% to 3.2%. As a result of downward revisions to the prior figure (from 5.7% to 5.5%), the yearly rate of PPI in the United States reported 4.6% in February, below the anticipated 5.40%.
7. Standard & Poor’s downgraded First Republic Bank to a “junk” rating and placed it on its “negative watch list” on 2017-07-07.
MARKET VIEWPOINTS
Newspaper writer Peter Thal Larsen of Reuters
After the financial crisis of 2008, governments around the world implemented new policies to make banking more secure and mitigate the damage that could result from a bank failure. Mid-sized and neighborhood institutions in the United States are not subject to these regulations, though, unlike their larger counterparts. Additionally, SVB’s CEO indicated in 2015 that the bank, similar to other mid-sized institutions, does not represent systemic danger. Thus, investors may suffer catastrophic losses in the event that SVB experiences a collapse, as there is no safety net in place. Furthermore, SVB revealed a weakness in the conventional assistance approach: there is no customer. Five days after SVB went insolvent, there was still no one to take over, and the US government was forced to do so. Previously, the government would organize for defunct banks to transfer their companies to big banks. Despite the fact that authorities won’t be explicitly recapitalizing banks, the resulting statement that savings are secure could put a significant strain on the United States’ ability to pay its debts.
T.D. Securities
High tangible demand for gold and balanced free trade situations reduce the likelihood of a bank rush. Strong real demand for gold in Asia will restrict losses from central banks’ ongoing battle against inflation, despite bank funding issues, suggesting that gold still appears to offer the most attractive risk-reward. Gold prices are expected to surge due to a shift of discretionary money flows and robust tangible money flows brought on by the possibility that the tightening cycle is nearing its conclusion.
Jim Wyckoff, a researcher with Kitco,
Safe-haven demand rises as bank panic increases.
Midday Wednesday in the United States saw a significant increase in the price of gold, while silver was nearly stable. Investors are getting more and more worried about the worldwide banking and financial catastrophe this week. Due to yesterday’s precipitous drop in European bank equities headed by Credit Suisse, the continent’s banking industry has received a great deal of attention. Banking upheaval that began in the US has now reached Europe. Yields on U.S. bonds dropped, and the U.S. index rose significantly, both of which suggest dealers and investors are feeling intense pressure and seeking refuge in secure assets. Gold contracts for April reached a five-week peak and exhibited positive outsourcing trend on the daily line. Bullish analytical indicators for gold contracts point to a positive outcome in the short run. The February peak of $1975.2 represents formidable opposition for bulls to overcome. The peak on Wednesday, $1935.6, and then $1950, are where sellers will likely encounter the most difficulty. If the price of Bitcoin drops and breaks below $1,850, the bearish will have achieved their short-term goal. Two key levels of support are in place, with $1,900 and Wednesday’s low of $1,889.5 providing the first level of safety.
Senior Investment Analyst Charalampos Pissouros from XM.
The market mood has drastically changed, favoring an increase in gold prices.
Tensions in the market were already high after the Friday failure of Silicon Valley Bank when Credit Suisse’s biggest investor, the National Bank of Saudi Arabia, announced it would no longer engage in the financial institution. Investors are now split on whether or not the Federal Reserve will increase interest rates again next week. As a result, all eyes will be on the Fed conference next week to see if another 25 basis point rate rise is implemented and how the new crisis affects officials’ views and predictions. The new dot plot might not indicate a steep rate reduction in light of Powell’s bullish address last week and CPI data indicating an increase in underlying inflation, which could cause rates on U.S. bonds to rise and gold prices to fall. However, this might not be enough to completely neutralize gold’s effect on SVB. Because the Federal Reserve has promised to help secure the financial sector, the ensuing benefits have been influential. Bulls may be on edge as long as there is a chance that demand for gold will increase due to economic growth in China and India. The basic analysis of gold shows that it has surpassed the $1,915 high set on Monday, with bears now targeting the $1,960 high set on February 2. If gold manages to push past that resistance mark, the uptrend may be able to reach $2,000 by March 8, 2022. A distinct breach below the 200-day moving average at $1,805 would signal that the bulls have the upper hand, and could lead to a decline all the way to the low of $1,725 seen on November 23.
