Gold News

Gold Prices Rebound as SNB Backstops CS, ECB Hikes, Ackman Calls for Blanket Guarantee

GOLD PRICES rose again in London trade Thursday, moving back towards yesterday's multi-month and new record highs against the world's major currencies as the latest government action to stem a worsening banking crash failed to stem a new fall in global stock markets.
"Time is running short before the fire becomes a conflagration," says hedge-fund manager Bill Ackman, now calling for the US government to make a 'short term' guarantee on ALL bank deposits after calling at the weekend for the authorities to backstop depositors at Silicon Valley Bank, a move they then made on Sunday which has spurred big withdrawals from smaller banks, transferred by anxious savers to the largest US institutions.
Shares in European giant Credit Suisse (SWX: CSGN) meantime bounced 30% before edging back after the Swiss National Bank declared overnight that – despite CS now losing more than 87% over the last 5 years, with 1/4 of that drop coming in the last month – "the problems of certain banks in the USA do not pose a direct risk of contagion for the Swiss financial markets."
US Dollar gold price. Source: BullionVault
Debt insurance contracts yesterday put the odds of the $8.4bn bank defaulting at 1-in-2, but "The strict capital and liquidity requirements applicable to Swiss financial institutions ensure their stability [and] Credit Suisse meets [them]" the SNB went on, adding that "If necessary, the SNB will provide CS with liquidity."
CS responded by saying it is borrowing "up to" CHF 50 billion (US$53.9bn) from the SNB – "decisive action to pre-emptively strengthen liquidity" according to the troubled lender – and using some of that money to buy back around US$3bn of its own debt.
Betting on next week's meeting of US Federal Reserve today flipped back to seeing a small rise in interest rates to 5.00% per annum as the most likely outcome after the European Central Bank went ahead with the steeper half-point hike it had pre-announced for Euro rates.
"Inflation is projected to remain too high for too long," the ECB said, adding of the CS and US banking slumps that the 19-nation central bank "is monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability and financial stability in the euro area.
"[Our] banking sector is resilient, with strong capital and liquidity positions."
European banking stocks mostly rallied from the last week's steep plunge, but Germany's No.1 Deutsche Bank (ETR: DBK) fell by another 5.3% to hit a fresh 5-month low in Frankfurt.
Global stock markets overall meantime gave back an early rally to trade lower for the 6th session in the last 2 weeks, retouching Monday's fresh 2023 low on the MSCI World Index.
Gold prices had retreated hard overnight but rallied back to $1925 per ounce for US traders and touching £1600 per ounce in UK Pounds and A$2,900 for Australian investors, both just shy of yesterday's fresh all-time gold highs.
"Longer-term, gold's strong average performance in the lead-up to and following both initial Fed rate cuts and US recessions keeps us biased for higher prices as macro uncertainty swirls," says a note from No.1 US bank (and London bullion clearer) J.P.Morgan, predicting a top above $2000 per ounce in 2023.
US banking stocks have sunk by 1/5th over the last 10 days, closing Wednesday at the lowest since mid-November 2020.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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