Daily Gold Market Report

From Bad Trucking Loans to Basel III Rules
Understanding Gold’s Value in a Risky Banking Landscape

(USAGOLD – 11/9/2023) Gold remains under pressure, trying to hold critical support around $1,950. Gold is trading at $1949.07 this morning, down $1.13. Silver is trading at $22.65, up 9 cents. The 4th US bank failure in 2023 occurred last week. Yahoo Finance reports, the collapse of Citizens Bank in Sac City, Iowa, was heavily impacted by its exposure to bad loans within the struggling trucking industry. Although this was a smaller regional bank, with losses estimated at $14.8 million, this highlights the risks associated with sector-specific loan portfolios, especially in industries experiencing financial distress.

Also in the banking world this week, The Wall Street Journal reports on the banking industry’s use of synthetic risk transfers (SRTs) and the implications of Basel III regulations. SRTs are financial instruments used by banks to manage the risk of their loan portfolios, effectively shifting the risk to other parties. Basel III regulations aim to address these kinds of banking practices by enhancing the management of banking risk and reinforcing the stability of the financial system. Given their complexity and the need for careful monitoring, it’s not clear that SRTs alone would prevent the next financial crisis. In fact, regulatory bodies caution against relying too heavily on SRTs, pointing to the necessity of maintaining a diverse set of tools and measures to manage credit risk and banking stability.

USAGOLD Comment: In times of financial instability or when confidence in the banking system is shaken, as evidenced by bank failures or heightened risk from concentrated loan portfolios, demand for gold typically surges.