Gold and Crisis Management

0

This post is also available in: فارسی (Persian)

How to get rid of bad loans!

By: Ahura Chalki

For many years, there are talks about manipulations and banks. Several books have been written about this subject that how banks creating certain prices for precious metals, especially for Gold and Silver. However, this article is not about that or its verification.

After several reports in past months about how banks involved more in the Gold business and especially after Monday’s FinCEN report, just simply checked a few figures and numbers, and here I am going to share them with you, with no judgment, just simply sharing the thoughts.

Firstly I need to mention that the current policy of lower and negative interest rates, causes lower income for the banks. Besides that, fewer loans accompanied by loss loans that borrowers are unable to repay.

The report lately from Financial Times, says “The combined total of $139bn in loan-loss provisions is the highest since the $186bn reached in the second half of 2009, the nadir of the financial crisis that brought down Bear Stearns and Lehman Brothers. Using a wider sample of banks, consultants at Accenture warn that the estimated losses from bad debts could rise to $880bn by the end of 2022.” (1)

So, the question is now, how banks supposed to recover the loosed and prevent bankruptcy?

Since the banks always are one of the biggest Gold holders, one of the ways that they can manage the situation is to use their influence in the market, to increase the Gold price, which normally in the time of Crises, it is happening by itself as well, however, they can manage how far this rally must go.

The Bellow figure is showing the changes in Gold prices in late crises, back in 2008-9, and what happened before and after that.

As we can see above, Gold from 2009 till 2011, rose by $1200, from $750 to $1900, and then, bellow figure shows the range movement between $1100-400, after correction and while the financial market did not face the current COVID-19 Crises, the market holds the same range.

And again from the beginning of this crisis, the market jumped $800 to the highest level ever, above 2K. (check the bellow figure)

Checking the news and reports, brought me to the article of Investing.com website, where it is mentioning that:

Deutsche Bank (DE: DBKGn) is adding a third person to its recently revived precious metals team, four sources said. Citi, Bank of America (N: BAC), French lender Natixis (PA: CNAT), and Australia’s Westpac (AX: WBC) have also hired in precious metals this year, according to sources and LinkedIn (NYSE: LNKD) profiles. (2)

Summary:

As history shows and based on the latest forecasts that recovery will need from 2-5 years, still and at least in a mid-term, uptrend and higher prices are predictable, before real correction and full recovery in the economy.


Risk Warning: Trading-Leveraged Products such as Forex and Derivatives may not be suitable for all investors as they carry a high degree of risk to your capital. Please ensure that you fully understand the risks involved, taking into account your investment objectives and level of experience, before trading, and if necessary, seek independent advice.

LEAVE A REPLY

Please enter your comment!
Please enter your name here