'More bank failures' coming as Fed hikes rates 25 bps, now is the time to ‘be bold' in gold - Danielle DiMartino Booth
The Federal Reserve hiked its key policy rate by 25 bps on Wednesday to the 4.75- 5.00 percent range, with Fed Chair Jerome Powell announcing that rate cuts are unlikely in 2023. Powell’s comments come after a series of major bank collapses in March including those of Silicon Valley Bank (SVB) and Signature, both of which had hundreds of billions in assets under management.
According to Danielle DiMartino Booth, CEO of Quill Intelligence and Author of Fed Up: An Insider’s Take on Why the Federal Reserve is Bad for America, “more bank failures” are coming. She pointed in particular to First Republic, a California-based commercial bank which is teetering on the edge of collapse.
“[Big] banks have a long enough memory to not step in and buy these flailing banks,” she told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News. “These banks are sitting in no man’s land, because nobody wants to say that they’ve failed... I think we are going to see more bank failures, because we have not seen the biggest banks step up.”
Following the failure of SVB and Signature, the Fed, U.S. Treasury Department, and Federal Deposit Insurance Corporation (FDIC) bailed out the banks’ depositors, including those with uninsured deposits above $250,000. Booth warned that a precedent has been set, with regulators signaling that clients in other banks could have full coverage of their deposits.
“The precedent has been set, and it cannot be unset,” said Booth. “As regulators, it’s not your job to pick winners and losers, but that’s the corner they [The government and Fed] backed themselves into when they backed all of the uninsured deposits of Signature and SVB.”
“We’re in the middle of a banking crisis that nobody wants to call a banking crisis,” she added.
To find out which banks DiMartino Booth forecasts will be next to fall, watch the video above
‘Be Bold’ in Gold Investing
As a financial crisis looms closer, DiMartino Booth sees gold outperforming all other assets, “including cash.”
“I think you can be bolder than [the traditional 5 to 10 percent portfolio allocation to gold],” she said. “This is the time when you can be bold in your allocation to precious metals, of course it is. And keep the powder dry. If there is major upheaval in a market, it is when everyone is afraid to get back in the water that it’s really the best time to go swimming.”
To find out why Booth forecasts an “unemployment rate shock” and significant market correction, watch the video above
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