March 20, 2023: Gold Ounce Reached 11-months High; Oil Plunged to 15-months Low

Gold prices rose above $2,000, despite central bank movements to reassure the markets.

Gold prices rose during Monday’s trading, which means the metal’s continued attractiveness as a safe haven amid crises, despite the authorities’ moves to reassure markets in the wake of the banking crisis.

UBS Sunday agreed to buy Credit Suisse for 3 billion Swiss francs ($3.2 billion). After the deal was announced, the US Federal Reserve, European Central Bank, and other major central banks pledged to boost market liquidity and support other banks.

Futures contracts for the yellow metal for April delivery rose 1.92% at $ 2028.50 an ounce at 11:29 GMT, and the spot price for delivery rose 0.80%, or $ 16.01, to $ 2005.26 an ounce.

Silver futures for May delivery rose 0.51% to $22.73 an ounce, while the spot price of platinum fell 0.51% at $973.95, and palladium fell 0.52% to $1415.83.

Given the current turmoil in the banking sector, Mark Zandi, chief economist at Moody’s Analytics, thinks it would be wise for the Fed to pause interest rate hikes.

Oil falls 3% at its lowest level in 15 months due to banking sector concerns.

Oil prices fell on Monday to a 15-month low on fears that turmoil in the global banking sector could lead to a recession that would dampen oil demand and concerns about a possible hike in interest rates in the United States this week.

Brent crude futures for May settlement fell $2.32, or 3.2%, to $70.65 a barrel by 0710 GMT. And contracts fell earlier to $ 70.56 a barrel, the lowest level since December 2021.

Brent fell by about 12% last week, its worst weekly performance since December.

US crude for April delivery also fell $2.15, or 3.2%, to $64.59 a barrel. It fell to $64.51, which was also its lowest level since December 2021.

US crude fell nearly 13% last week, its worst weekly performance since April.

April contracts expire on Tuesday, and the most heavily traded May futures contract also fell 3.2% to $64.81 a barrel.

The drop in oil prices comes despite a historic deal under which Switzerland’s largest bank, UBS, will acquire Credit Suisse, the country’s second-largest bank, to halt the spread of the banking crisis.

After the deal was announced, the Federal Reserve, the European Central Bank, and other major central banks pledged to boost market liquidity and support banks.

“The market’s focus is on the current volatility in the banking sector and on the potential for the Fed to raise interest rates,” said Baden Moore, head of commodities research at the National Australia Bank.

Moore added, “The upcoming meeting of the Organization of the Petroleum Exporting Countries (OPEC) is another potential catalyst for market expectations. The downward price trend reinforces the possibility that OPEC will cut its production further to support prices.”

UBS acquires Credit Suisse in a landmark deal to end the crisis.

UBS has agreed to buy smaller rival Credit Suisse for CHF3 billion, in a landmark deal with Swiss regulators playing a key role in the agreement, as governments sought to stem a contagion threatening the global banking system.

“With the acquisition of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation,” a statement from the Swiss National Bank said, noting that the central bank is working with the Swiss government and the Swiss Financial Market Supervisory Authority to achieve the merger of the two largest banks in the country.

According to the findings, the Swiss National Bank provided financial assistance through loans of 100 billion Swiss francs ($108 billion) to UBS and Credit Suisse.

The Swiss government said UBS would bear the first CHF5 billion under the government guarantee for losses in the Credit Suisse takeover, the federal government for CHF9 billion, and any further losses for UBS.

Swiss President Alain Berset announced yesterday evening, Sunday, the news of the acquisition in an attempt to avoid further turmoil that shook the global banking services market. The Swiss president described the agreement as “an important factor for stabilizing the international finance market. Because an uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the global financial system.”

Credit Suisse is classified by the Financial Stability Board. This international body monitors the global financial system as one of the Banks of Global Importance, which means regulators believe its disorderly collapse will trigger tsunamis throughout the financial system, not unlike the collapse of Lehman Brothers 15 years ago.

The Swiss financial market supervisor said Credit Suisse’s transition would ensure stability for the bank’s clients and financial markets. For her part, the Swiss Finance Minister said that a loss guarantee is a form of insurance for “UBS.” She added that the bankruptcy of a crucial global bank might have irreparable consequences for global financial markets.

The deal comes just days after Credit Suisse, founded 167 years ago, secured a $50 billion (CHF54 million) loan from the Swiss National Bank, which briefly caused the bank’s share price to soar. Nevertheless, according to news reports, the move needs to be revised to stem the flow of deposits.

European stocks fell, with banking shares tumbling after the acquisition of Credit Suisse.

European stocks fell on Monday, with Credit Suisse shares losing more than 60% after UBS agreed to buy a struggling rival in a $3 billion deal. Credit Suisse is valued far below its market value, sparking fears of a widespread banking crisis.

The Stoxx Europe 600 index of European shares fell 0.8% after recording the largest weekly loss during the current year last Friday.

Credit Suisse shares plunged 62.3% after rival UBS said on Sunday it would pay 3 billion Swiss francs, or $3.23 billion, to buy the 167-year-old bank, which is suffering a loss of up to $5.4 billion in a bailout package overseen by Swiss regulators.

UBS shares fell 14% as a result. The banking sector index fell 5.8 percent in early trade. Shares of Deutsche Bank lost about 10.9% and Commerzbank by 8.5%, while shares of BNP Paribas and Societe Generale of France lost about 8.2% and 7.5%, respectively.

Standard Chartered fell to the bottom of the FTSE 350 index, recording a loss of 7.7%, while NatWest and Barclays shares fell by 7.8% and 7.4%, respectively.

Japan’s Nikkei closed at a two-month low, and Credit Suisse’s sell-off did not allay market fears.

Japan’s Nikkei closed at a two-month low on Monday, March 20, as fears of a possible recession and crisis in the global banking sector led to risky assets being sold off despite a deal reached over the weekend to bail out Swiss Credit Suisse.

The Nikkei closed 1.42% down to 26945.67, the lowest close since January 23, and the broader Topix index lost 1.54% to 1929.30.

In light of the crisis that began with the collapse of Silicon Valley Bank in the US on Friday, investors lost confidence in US regional banks and Credit Suisse in Europe.

UBS said at the weekend that it would buy Credit Suisse for 3 billion francs, equivalent to $3.2 billion, and incur losses of up to $5.4 billion, in a merger deal drafted by the Swiss authorities.

Japan’s banking sector lost 1.88% after jumping more than 1% earlier in the session.

The index has lost 13.6% this month, the worst performer, along with the insurance sector, which also recorded a similar decline.

Mitsubishi UFJ Financial Group lost 1.84%, Sumitomo Mitsui Financial Group 1.67%, and Mizuho Financial Group 2.3%.

Cryptocurrencies declined, and Bitcoin is trading near $28,000

Bitcoin fell on Monday after posting its best weekly performance in four years, during which it rose 26%, as turmoil in traditional banking prompted some investors to turn to digital assets.

Bitcoin is expected to reach $45,000 by the end of the year as liquidity from central banks finds its way into digital assets, much as it did during 2021 when bitcoin soared to record highs.

Bitcoin fell 1.34% at $27,953.75 at 07:24 GMT, according to Coinbase data. Ethereum also fell by 2.89% to $1,773.80 after reaching a seven-month high of $1,846.50, and Ripple fell 1.30% at 38.29 cents.

Balaji Srinivasan, former chief technology officer of Coinbase, claimed on Twitter that an impending global banking crisis could push Bitcoin to $1 million in less than 90 days after predicting that the crisis would lead to hyperinflation in the US economy.

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