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Top Stories This Week: US Bank Failures Send Gold Flying, M&A Continues
Mar. 17, 2023 02:00PM PST
Bank collapses have carved a path to US$2,000 for gold; meanwhile, Gold Fields and AngloGold Ashanti are teaming up in Ghana.
Gold was on the rise this week as the broader financial markets faced turmoil.
The yellow metal neared US$2,000 per ounce on Friday (March 17) after ending February at about US$1,810.
The rise has been a little bumpy — gold jumped to the US$1,855 level in the first week of March, then pulled back to US$1,810. But this week it rocketed past US$1,900, rising as high as US$1,988.18, where it closed the week.
What's driving gold's price gains? Gold often fares well during times of turmoil, and we've certainly seen that over the last week — Silicon Valley Bank (SVB) shut down on March 10, and two days later Signature Bank closed its doors as well.
Both were American banks, with the former focused on lending to tech companies, and the latter centered on corporate customers, many of which were involved in the cryptocurrency sector.
The largest bank failure in US history happened in 2008, but SVB and Signature Bank represent the second and third largest collapses. Although the US government has stepped in to make sure that customers won't lose their money, these crashes have sparked major concerns about the health of other banks, sending their shares tumbling.
Rising interest rates are partially to blame for the downfall of SVB and Signature Bank, and now all eyes are shifting to the US Federal Reserve's upcoming meeting, which will run from March 21 to 22. Previously a 25 basis point increase was widely expected, but now market watchers are reevaluating their expectations. Complicating the matter is this week's consumer price index data, which shows that US inflation was up 6 percent year-on-year in February and 0.4 percent month-on-month.
This story is still developing, and next week we'll have commentary on the situation from experts like David Morgan of the Morgan Report and Will Rhind of GraniteShares. We'll be posting their interviews on our YouTube channel, so stay tuned.
Gold Fields, AngloGold Ashanti team up in Ghana
As a final note, if you thought M&A activity in the gold space was over, think again.
This week, Gold Fields (NYSE:GFI) and AngloGold Ashanti (NYSE:AU) announced a proposed joint venture between their neighboring mines in Ghana. The move would create Africa's largest gold mine.
"This combination puts together two parts of the same world-class ore body, allowing us to share skills and infrastructure to significantly enhance every aspect of this mining operation, from exploration and planning, to mining and processing" — Alberto Calderon, AngloGold Ashanti
Technically this isn't a merger or acquisition — in fact, the companies said they aren't considering a full combination. But the move does highlight how large players in the gold space continue to look for ways to achieve synergy in their operations.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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