A US banking collapse? Volatility & gold see to rise again
Is a market crash coming?
And is it time to buy gold with another US banking collapse in question? Here is why you could expect higher levels in gold and the fear index (the VIX). And maybe see banks and broad markets to get shaky...
US bank stocks tumbled on Thursday, with two banks hit by fraudulent loans. Elsewhere, more cracks are emerging in US credit markets, with some banks lending like drunken sailors. What then happened next? Well firstly, market fear tracked by the $CBOE Volatility S&P 500 Index (.VIX.US)$ rose to its highest level since tariff concerns. And gold hit another record high. Rising 0.6% overnight to US$4,353 an ounce. That's another record high. And takes this week’s gain to 10%. Gold is now up 18% over the past month amid Fed rate-cut hopes. And now fresh credit-crunch concerns.
Let’s pause on the major concerns lurking in markets...
1 – Overnight, market fear surged: The $VIX (LIST91327.US)$ jumped 25% to 25, its highest close since April during the tariff-concern period. Rising fear (volatility) reflects growing anxiety over credit conditions — and this usually triggers markets to fall.
2 – What’s happening? The US banking sector looks shaky. Two auto-related companies went bankrupt — one had its loans secured by JPMorgan — and two other banks reported fraudulent loans. All in all, serious credit-crunch worries are emerging. Big investors and corporations are now wondering: Which firms might be next to collapse? Who’s exposed to loose or risky lending practices? Many will recall 2023, when five US banks collapsed (including SVB), and wonder if history could repeat.
3 – The upside? Gold typically rallies when credit fears spike — and as market fear (volatility) rises, expect higher levels for both the VIX and gold. Expect safe-haven flows into gold.
4- Pressure on markets? Investors may likely trim their winners, so expect outflows (selling in stocks) that carry higher debt levels. Sectors such as tech, biotech, real estate, and consumer discretionary — which usually underperform when the VIX jumps. But if markets correct or pull back sharply, that could create plenty of buying opportunities. Which will be great for long-term investors and those holding cash.
Investments to add to your watchlist
– Newmont $Newmont (NEM.US)$ — the world’s biggest gold miner — is now the third-best performing stock in the S&P 500 this year, up 167% YTD and 22% this month.
- Other Gold investments to watch include $SPDR Gold ETF (GLD.US)$ which is the world's biggest holder of gold. And $VanEck Gold Miners Equity ETF (GDX.US)$ which is the world's biggest gold mining ETF.
- If you believe my thesis that gold could rise to US$6,000 then it's worth adding gold stocks or ETFs to your investment portfolio.
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Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Jessica Amir
Moomoo Market Strategist
moomoo, market strategist.
Seen/heard on Fox News Business, ABC, SBS, Reuters wires.
Investor/Trader.
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151453268 witso : yep there it is again, the old fed debt a bit like the ugly step sister once you have been down that rode she becomes extremely hard to out run atleast we have gold shining
151453268 witso : Gday Jess, i swear you have gold fever, you mentioned the word gold like ten times i think and Newmont to boot, the vix doesnt scare us gold people we know our darling miners will stick their heads up for a moment like a meer kat squeak at the nasdaq then return to digging god bless em.
