It’s not even April 1st yet, but the Fed is already playing jokes on us with Wednesday’s press release stating that, “The U.S. banking system is sound and resilient.”
Do I hear crickets in the background?
This release coincides with a rate hike of 25 bps to the Feds key policy, bringing it up to the 4.75 – 5.00 range, and an announcement by Jerome Powell that rate cuts in 2023 are unlikely.
Because it’s not like these rate hikes, which were consistent (and persistent) throughout 2022, led to any catastrophes… like say – the failure of two major US banks in a matter of days.
Oh wait – that did happen!
But by all means, let’s continue running this “sound and resilient” banking system in exactly the same fashion that subjected the economy to its current state of affairs.
Many believe that the failure of SVB and Signature Bank are the first in a series of failures to come. Though I like to be more optimistic, it’s hard to disagree with this perspective as we’re dealing with an economy that was built on artificially low interest rates and rising inflation, and we’re now feeling the effects of this synthetic economic ecosystem.
With the stability of the US dollar (and US banking system for that matter) in question, there’s a lot of attention being directed to the precious metals sectors. Investors are seeing gold, silver, and other precious metals as a safe haven for their wealth during this rocky (and let’s face it – confusing and senseless) time.
So who should you believe? The Fed who claims that the banking system is “sound and resilient? Or those who are rightfully dubious about the accuracy of this claim and are promoting alternative investments.
As always – do your research! But I’m going to share below some perspectives from industry experts encouraging investors to be bullish on gold, and their reasoning why:
Who: Otavio (Tavi) Costa, Crescat Capital Portfolio Manager
What He’s Saying: “If the current inflationary issues prove to be structural, we are likely entering a secular bull market for precious metals.”
Check out his tweets here.
Who: Danielle DiMartino Booth, CEO of Quill Intelligence
What She’s Saying: “I think you can be bolder than the traditional 5 to 10 percent portfolio allocation to gold. This is the time when you can be bold in your allocation to precious metals, of course it is. And keep the powder dry. If there is major upheaval in a market, it is when everyone is afraid to get back in the water that it’s really the best time to go swimming.”
Check out the full story here.
Who: Michael Maharrey Managing Editor of the SchiffGold LLC Blog
What He’s Saying: “If banks were suddenly forced to liquidate their bond and loan portfolios, the losses would erase between 77 percent and 91 percent of their combined capital cushion. It follows that large numbers of banks are terrifyingly fragile.”
Check out the full story here.
What’s frightening is that the institutions that have been put in place to protect the American economy no longer seem to be a voice of reason during this unprecedented time. When leadership lacks confidence and onlookers can sense instability and fragility, fallout ensues, leaving many looking for something solid to grab onto in hopes of weathering the storm.
Are precious metals that something solid to grab onto? I want to hear your thoughts on this and invite you to share them in the comments below.
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