The banking crisis may finally spur gold to break past its longtime $2000/oz barrier. Gold may finally be prepped to break past its $2000/oz resistance and shatter its reputation among crypto bros of being a “Boomer Rock” in 2023, according to macro strategist Mike McGlone of Bloomberg Intelligence.
The analyst believes that as the macroeconomic environment gets worse, investors are once again retreating to gold as a safe haven – alongside US Treasuries and Bitcoin.
Gold’s Return to Form
In a shared excerpt from McGlone’s Bloomberg Terminal report, the analyst claimed that the global banking crisis and the phenomenon of deflating commodities may reinvigorate the upward trajectory gold experienced since 2001.
“Baby boomers have done well in the stock market, but are finding robust alternatives in US Treasuries, gold and, gingerly, in Bitcoin,” he wrote on LinkedIn.
Both gold and Bitcoin surged after the Federal Reserve promised to bail out Silicon Valey Bank (SVB)’s depositors earlier this month. The former bounced from resistance at $2000 on both March 17th and March 24th, a level its consolidated narrowly beneath since 2020.
In that same period, Bitcoin soared from under $4000 in March 2020 to an all-time high of $69,000 in 2021, prompting major investors to deem the latter a superior asset. The two are often compared on their attributes of “sound money” – namely that they are both fixed in supply and can thus theoretically serve as inflation hedges.
Neither technically performed that role, as both assets declined to multiyear lows amid soaring inflation and resign interest rates. However, the banking crisis – which has injected billions of dollars of new liquidity into the economy – may have both finally living up to their name.
“This is our base case for the metal, on the back of what’s shaping up as a severe economic reset,” wrote McGlone. “The Federal Reserve’s 25bps rate hike on March 22, despite deflationary implications from plunging commodity and housing prices, and a bank run partially due to the rapid pace of rate hikes, have 1929ish inkling in our view.”
Loss of Faith in Banking
The analyst also noted the record pace at which deposits are fleeing the banking system, with U.S. commercial bank liabilities not plummeting so fast since 1971 – when the United States abandoned its gold standard.
Besides SVB, institutions like Signature Bank have faced multi-billion dollar runs on their deposits this month, while stock in others has collapsed at record rates. Credit Suisse ultimately fell to such pressures weeks ago as banking panic crossed the Atlantic, with even worry even beginning to surround the likes of Deutsche Bank.