American futures and European markets are very anxious, with expectations hanging by a thread that SVB’s contagion would not spread further. The fact is that this is a long-awaited occurrence, and it is doubtful that traders’ trust can be restored until central banks offer assurance that they have comprehended the issue.
In Europe, traders are pricing in a 25 basis point rate rise from their earlier anticipation of 50 basis points. If the ECB succumbs to the SVB threat, it is probable that other central banks would follow suit. The reality is that we are in a difficult period, and no one now working at the Fed or the ECB has encountered a comparable circumstance. True, similar scenarios occurred in the past, such as 1973, but none of the Fed members or ECB parliamentarians was in the position that they are in now. As a result, the whole equation becomes quite complicated.
Gold
Today’s metals market correction follows the remarkable advances of the previous two days. There is no doubt that there is still a lot of danger out there, as well as a lot of unsolved questions. As a result, traders should exercise care and not leave their portfolios fully exposed, i.e. without any protection. The recent decline in the gold price provides a chance for individuals who have not purchased portfolio protection to do so now.
The reason why we are positive about the future course of gold prices stems from the fact that the volatility index, which measures anxiety, remains at an ultra-panic level, indicating that traders are hesitant to support riskier assets. The recent loss of momentum in the gold price is mostly due to the lack of any meaningful signal from the Fed indicating that the process of interest rate hikes would be slowed. The Fed is hoping that other government agencies will be able to put out the fire that they ignited.
We feel it is preferable to be long on gold for the time being since there is a lot of uncertainty, and the only thing that can affect the direction of the gold price right now is the strength of the dollar index, which is determined by the Fed’s monetary policy.
Bitcoin
The crypto king has shown its risk-off asset characteristics. We have witnessed significant upward momentum over the last three days as investors seek protection. Bitcoin desperately needed to rebuild its image as a safe refuge and an alternative to the existing global banking system. We have seen a lot of interest in bitcoin, and it seems that this boom will continue despite the fact that large crypto banks have closed their doors. Yet, bitcoin is not too dependent on this, which is the beauty of it.
Since the fall of the SVB, it is probable that some CFOs may now turn to bitcoin to diversify their exposures. This is because bitcoin has once again shown its ability to resist any kind of uncertainty.
Moreover, there is a proven historical record of investors favouring stable currencies over bitcoin being reversed. They now understand that there is nothing as secure and transparent as bitcoin, and that it is the ultimate game changer.
Technically, the barrier of 25K is expected to hold the rising momentum in check, and a breach of this will open the door to the following level, which is 30K.
