Here We Go Again. Another Bank Collapses! What Does That Mean For Commodities?

The Domino Effect: Major Bank Failures Shake Global Confidence

Google searches for the phrase “Is My Money Safe In The Bank” hit an all-time high on Monday after First Republic became the fifth major bank to collapse within two months.

Global banking fears were reignited again last week after a number of major financial institutions including First Republic, Bank of America, Barclays, Lloyds and Santander raised fresh alarm bells after reporting significantly worse than expected deposit outflows.

Shares of First Republic, one of the United States largest banks plunged to a record low on Friday – wiping out more than 97% of their value – after the lender announced a huge exodus in deposits totalling more than $100 billion last month.

Just hours before markets were set to open on Monday, U.S regulators seized control of First Republic Bank and sold it to JPMorgan Chase – a dramatic move, marking the failure of a fifth major bank within two months – following on from the collapse of Silvergate Capital, Silicon Valley Bank, Signature Bank and Credit Suisse.

First Republic joins a list of the biggest ever banking failures in history, by becoming the second largest U.S bank to collapse after Washington Mutual, which failed during the Global Financial Crisis in 2008.

Economists are convinced that this is just the tip of the iceberg. Conclusive evidence shows the global banking crisis was fuelled as a direct consequence of soaring interest rates – and the turmoil is far from over.

Fed Confronts Rate Hikes Amid Economic Instability

Looking ahead, The Federal Reserve now faces a tricky balancing act as policymakers prepare to deliver their 10th consecutive rate hike.

Fed officials have signalled that the FOMC will hike rates by another quarter basis point at its May 2-3 meeting to a range of 5% to 5.25%, the highest since 2007 – reaching levels last seen prior to the 2008 Global Financial Crisis.

Clearly conditions right now are very different than they were a year ago when the Federal Reserve embarked on their most aggressive interest rate hiking campaign in history. Banks are failing, risky assets such as equities are wobbling and recession risks are rising fast.

Commodities Emerge as Safe Havens Amid Growing Recession Risks

There is no denying that the current macroeconomic backdrop is fuelling a “perfect storm” Commodities. Historically, each time, Commodities have started the year on a positive note – they have always gone onto the finish the year outperforming every other asset class out there.

Whichever way you look at it, one thing is clear. The case for Commodities in a well-diversified portfolio has never been more obvious than it is right now!

Commodity Price Forecast for May 02, 2023

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions: