Contained? or Not Contained?

Ima Casanova

May 10, 2023

It is likely a bit too early to say whether the banking crisis in the U.S. is contained or over. At the end of April, the collapse and rescue of yet another bank, First Republic Bank, is clear evidence that risks remain.

Once again, regulators intervened and a more catastrophic failure was averted. However, it is another sign of the current fragility of the global financial system. Even if this was the end of the banking turmoil, which appears unlikely, these recent developments expose the significant stress imposed on the economy by higher interest rates and certainly worsen and accelerate the chances of a recession or hard landing. It also makes it very clear that, like the banks, other sectors of the economy may be vulnerable, increasing uncertainty and volatility in the markets. This is supportive of gold prices.