Sive Morten
Special Consultant to the FPA
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Fundamentals
Gold has passed through recent doom and gloom of the Fed and NFP reports relatively quiet. At least no one reaction has become a hazard for existed bullish context. This means a lot. In fact, despite often speculation concerning ETF holdings, that they were dropping actively in recent few months, Gold does not show strong drop, suggesting that interest to gold is still high. We think that this tendency remains in the future
Market overview
Gold firmed on Monday as rising tensions in the Middle East lifted demand for the safe-haven asset, while markets awaited a Federal Reserve policy decision later this week for more clues on the timing of this year's first U.S. interest rate cut. Washington was considering its response to the first deadly strike on its forces in the Middle East since the Gaza war began after a drone attack in northeastern Jordan at the weekend killed three U.S. servicemen and wounded at least 34.
Last week data showed moderate growth in U.S. prices in December, keeping annual inflation below 3% for a third consecutive month and potentially allowing the Fed to begin cutting interest rates this year. A Reuters poll showed on Monday that uncertainty about the economy and U.S. interest rate cuts could drive record gold prices in 2024.
India's gold demand is expected to be subdued in the first quarter of 2024 due to lower jewellery sales, but annual demand is anticipated to rise as consumers adjust to higher prices, the World Gold Council (WGC) said on Wednesday. Higher purchases in the world's second-biggest gold consumer could support prices , which are trading near record highs. Rising demand for imports could also widen India's trade deficit and put pressure on the rupee.
India's gold demand has been stuck between 700 and 800 metric tons in the past five years, but it is expected to break out of this range and rise to between 800 and 900 tons in 2024, Somasundaram P.R., CEO of WGC's Indian operations told Reuters.
Meanwhile, gold smuggling into India gained momentum to approximately around 130 tons from around 110 tons a year ago, Somasundaram said, due to prices reaching record highs.
Gold prices reversed course and edged lower on Wednesday after the Federal Reserve Chair Jerome Powell pushed back strongly against expectations of a U.S. rate cut by March. The U.S. central bank left interest rates unchanged but Powell knocked down the idea the Fed could cut rates in the spring, which many market participants have been expecting.
Strong physical and central bank demand for gold will continue, said Daniel Ghali, commodity strategist at TD Securities. Data showed U.S. private payrolls rose far less than expected in January. Investors also took stock of news the New York Community Bancorp, opens new tab cut its dividend and posted a surprise loss, renewing fears over the health of similar lenders.
The Labor Department said initial jobless claims increased to a seasonally adjusted 224,000 for the week ended Jan. 27. A separate report showed that U.S. worker productivity grew faster than expected in the fourth quarter. According to the CME Fed Watch, opens new tab Tool, traders now expect about a 70% chance of a U.S. rate cut in May, compared to 92% before the data. Lower interest rates boost non-yielding bullion's appeal.
Gold prices slipped on Friday as the dollar and yields jumped after a strong U.S. nonfarm payrolls report which created some uncertainty about whether the Federal Reserve might start cutting interest rates soon. U.S. employers added 353,000 jobs in January, beating the 180,000 economists had expected. A resilient economy and strong worker productivity encouraged businesses to hire and retain more employees, a trend that could shield the economy from a recession this year.
World Gold Council View
Global gold demand excluding over-the-counter (OTC) trading fell by 5% from to 4,448.4 metric tons in 2023 but remained strong compared with a 10-year average due to geopolitical and economic uncertainty, the World Gold Council (WGC) said on Wednesday. Ongoing conflicts, trade tensions and over 60 elections taking place around the world are likely to support demand this year and compensate for a potential hit to jewellery purchases amid high prices and economic slowdown, it added.
Including demand from the OTC markets and other sources, total demand climbed by 3% to a new annual record at 4,898.8 tonnes and supported the growth of the 2023 average gold price to a record high of $1,940.54, the WGC said in its quarterly demand trends report. Gold prices hit a record $2,135.4 per troy ounce in December and have held above the $2,000 psychological level so far this year. The latest Reuters poll expected the precious metal to average $2,053.5 an ounce in 2024.
Annual demand growth in the OTC market hit 753% last year, the most since at least 2011, WGC data showed. Investors are expected to continue accumulating gold at an accelerated pace this year, largely driven by the Federal Reserve’s expected pivot toward easing, according to Cavatoni. Central-bank buying maintained a breakneck pace, with annual net purchases of 1,037 tons last year, just 45 tons shy of the record set in 2022, the WGC said in the report. It expects central-bank buying to top 500 tons this year.
The expected OTC spree, as well as central-bank buying, will provide a key counterweight to softness elsewhere, especially exchange-traded funds. That provides strong upside for prices, with a case for $2,200 an ounce or more, according to Cavatoni.
Purchases from central banks are expected to slow down by around 200 tonnes in 2024 but remain higher than prior to 2022, Reade said, adding that it was a conservative scenario, and that demand could speed up. In 2023, jewellery consumption was steady at 2,092.6 tonnes due to 17% post-COVID increase in demand in China and despite high gold prices, the WGC said. Buying of gold bars and coins fell by 3% as European demand continued to plummet, while outflows from exchange traded funds (ETFs) storing bullion for investors continued for the third consecutive year with 244.4 tonnes of decline, it added.
Two cents on the FOMC meeting
Yesterday we've discussed major economical issues, concerning NFP report and explained why, by our opinion it is, let's say, "not quite correct". By opinion of many economists (including us), the US economy continues (in our opinion, from the fall of 2021) to decline, which is masked by both underestimation of inflation and mechanisms for translating the growth of financial asset capitalization into GDP.
The US Federal Reserve's Open Market Committee did not change the key rate. The Fed's cover letter says:
At the press conference, Powell said (I would split it in groups):
Inflation
Rate
Note that although the rate was not changed, the policy of reducing the Fed's balance sheet (withdrawing money from the economy) continues. At the same time, Powell understands that the issue may have to be re-stored (pre-election year).
Powell explicitly warned that inflation could start to rise despite the Fed's policy. Well, what he will do in this situation-it is explicitly stated that decisions will be made according to the situation. If we could ask questions to Powell, then the main question would be: in what sectors GDP is growing and how the rate policy takes into account the length of the working week. Overall, the structural crisis in the global economy continues. And there is no reason to believe that the situation will change in the coming years.
The Fed's quantitative tightening continued in January. Total assets on the Fed's balance sheet fell $51 billion in December to $7.63 trillion, according to today's weekly Fed balance sheet. ️This is the lowest figure since March 2021. Since QE ended in April 2022, the Fed has reduced its balance sheet by $1.34 trillion. ️The Fed confirmed that it will continue QT for now in the FOMC statement and at Powell’s press conference, but at the same time, JPow said that they could start discussing the balance issue in March:
China Demand for Gold
In China, demand for gold jewelery is likely to remain stable, as consumers have sought to preserve value in the safe-haven asset against a weakening currency and an increasingly uncertain economic outlook. Chinese investors and households have been buying gold as a refuge from local property and stock market mayhem, helping to support record prices for the haven asset.
According to the WGC, Chinese demand helped push the gold price to record highs last month and keep it above $2,000 per troy ounce this year. Chinese investment demand for gold — spanning bars and coins — grew 28 per cent to 280 tonnes, largely offsetting a steep drop in Europe. The country’s jewellery consumption rose 10 per cent to 630 tonnes last year, even as global demand remained flat. Just for comparison, Russian individuals have bought gold just for ~ 98 tonnes this year.
Due to huge personal savings, accumulated during pandemic on a background of collapse of real estate giants (such as Evergrande), and stock market in general (CSI 300) it is logical that people are searching assets that could preserve value and safe their money. Not only Gold but BTC as well have become a "safe haven", despite that investing in BTC is officially forbidden. Analysts at UBS said Chinese demand had been “under-appreciated” as a factor driving gold prices.
For the central banks per se, this is generally quite modest volume ~$65 billion per year (with foreign exchange reserves of almost $12 trillion). PBOC buys almost non-stop ~60 tons per quarter and in 2023 bought 225 tons. Here the question is rather not even in volumes, but in the synchronicity and rhythm of purchases - every quarter. This forms solid price support - the Central Bank is slowly and systematically buying, which, even at high rates, did not allow gold to fall. In 2023, demand increased in the over-the-counter (OTC) market (as shown above), where big money quietly buys large volumes without unnecessary regulation (~450 tons in 2023 - an increase of more than 8 times).
Considering that 2024 is a year of big risks: political (elections), geopolitical (Middle East, Ukraine, Taiwan, China-USA...), economic (stagnation/recession), financial stability risks (debts, liquidity, rates), Elections in the US, Russia etc. , in general, demand promises to be consistently high. Although positive real rates limit the growth of gold, a reversal of the Central Bank could add momentum... but for now the market is overly optimistic in terms of expectations for a rate cut, let's see what the Fed says today. In any case, Central Bank purchases and a wide range of risks will likely continue to act as strong support for gold prices.
Besides, as we've mentioned in our previous reports, the situation with real interest rates could change. Here we can personally observe the behavior of investors who previously invested in over-inflated technologies, and as soon as the crisis came, they ran not into real estate, but, first of all, into gold. Well, and in crypto. So everything is going as we've mentioned even last year:
Few other issues to mention
Here we talk just briefly. Shares of New York Community Bank, $NYCB , the bank that acquired failed Signature Bank, fell 40% after suffering losses. The bank announced that they would cut their dividend by 70% to comply with regulatory requirements. They also reported a Q4 loss of $260 million. This comes just weeks before the Fed's emergency lending program expires. Moody's could cut the rating of the bank to junk level.
The banking “disease” from March 2023 has not gone away. In the USA, 10 months later, a second wave of bank collapse began (regional banks tied to real estate). Paper losses of American banks on office real estate already exceed a trillion dollars. And Powell’s support program will end in 1.5 months. Along with them, the Japanese Aozora Bank, which invested heavily in American commercial real estate, also falls:
It would seemed, NYCB that took over the ill-fated Signature Bank reported a small profit and reduced dividends (it didn’t even refuse due to losses) and the shares of regional banks are diving down. But, in fact, they are not threatened by the fall of shares, but by the potential outflow of deposits. Now, until March 11, while BTFP is in effect, they can still attract liquidity in case of flight.
After March 11, they will have to go to the Fed and pledge their assets there in order to attract money, but not at par value (as now for treasuries and mortgage securities), but at the market value (i.e. their balance value). And this, no matter how hard the Fed tries, will be a sign of an unhealthy situation for other banks, because only those who have saved themselves to the maximum resort to the discount window. So interbank repo will be closed for them, and this could be worse than the flight of depositors.
The UAE is becoming the world's largest financial intermediary. Now with the creation and launch of a settlement and payment system independent of the US and EU (this will take a couple of years, maybe less, given the degree of readiness of national payment systems in all countries, as well as the digital ruble in China, India and Russia), the dynamics can be very impressive.
And the last one - just the chart - inflation is defeated totally...
The United States and its allies find themselves in a new Middle East game in the role of wingmen: politicians and the military are forced to make move after move, but each new move worsens the situation. In chess, this position is called "zugzwang". Maintaining a presence in the Middle East for the United States means getting involved in a new war, for which there is neither money nor resources, which is guaranteed to lead to defeat. However, abandoning the war means leaving the region, like Afghanistan, and this means losing control over the largest oil-bearing region on the planet and the most important logistics hub. Thus, the game can no longer be reduced to a draw. For the United States, the loss of the Middle East would be a blow comparable to the withdrawal of Soviet troops from the GDR.
Gold has passed through recent doom and gloom of the Fed and NFP reports relatively quiet. At least no one reaction has become a hazard for existed bullish context. This means a lot. In fact, despite often speculation concerning ETF holdings, that they were dropping actively in recent few months, Gold does not show strong drop, suggesting that interest to gold is still high. We think that this tendency remains in the future
Market overview
Gold firmed on Monday as rising tensions in the Middle East lifted demand for the safe-haven asset, while markets awaited a Federal Reserve policy decision later this week for more clues on the timing of this year's first U.S. interest rate cut. Washington was considering its response to the first deadly strike on its forces in the Middle East since the Gaza war began after a drone attack in northeastern Jordan at the weekend killed three U.S. servicemen and wounded at least 34.
"That has ratcheted up the tensions in the Middle East even higher, and that's what has the money moving into the gold and silver market on a safe-haven demand basis," said Jim Wyckoff, senior analyst at Kitco Metals.
Last week data showed moderate growth in U.S. prices in December, keeping annual inflation below 3% for a third consecutive month and potentially allowing the Fed to begin cutting interest rates this year. A Reuters poll showed on Monday that uncertainty about the economy and U.S. interest rate cuts could drive record gold prices in 2024.
India's gold demand is expected to be subdued in the first quarter of 2024 due to lower jewellery sales, but annual demand is anticipated to rise as consumers adjust to higher prices, the World Gold Council (WGC) said on Wednesday. Higher purchases in the world's second-biggest gold consumer could support prices , which are trading near record highs. Rising demand for imports could also widen India's trade deficit and put pressure on the rupee.
India's gold demand has been stuck between 700 and 800 metric tons in the past five years, but it is expected to break out of this range and rise to between 800 and 900 tons in 2024, Somasundaram P.R., CEO of WGC's Indian operations told Reuters.
Indian gold demand fell 3% in 2023 from the prior year to 747.5 tons, the lowest since 2020, as prices rallying to a record high curtailed jewellery demand, the WGC said in a report published on Wednesday. In the March quarter, demand is expected to stay low due to fewer auspicious wedding days, the WGC said. Indian gold consumption in the Oct-Dec quarter fell 4% to 266.2 tons, as a drop in jewellery demand overshadowed higher sales of coins and bars for investment purposes, the WGC said."Given the fact that high prices have now been absorbed and economic growth is robust, demand is resetting its base to 800 to 900 tons," he said.
Meanwhile, gold smuggling into India gained momentum to approximately around 130 tons from around 110 tons a year ago, Somasundaram said, due to prices reaching record highs.
Gold prices reversed course and edged lower on Wednesday after the Federal Reserve Chair Jerome Powell pushed back strongly against expectations of a U.S. rate cut by March. The U.S. central bank left interest rates unchanged but Powell knocked down the idea the Fed could cut rates in the spring, which many market participants have been expecting.
Powell sounded some dovish notes but the key comment is "not March", which should keep the rate-cut hounds at bay for now, said Tai Wong, a New York-based independent metals analyst. Gold has really been fairly bulletproof, but incoming data will be heavily parsed, Wong added.
Strong physical and central bank demand for gold will continue, said Daniel Ghali, commodity strategist at TD Securities. Data showed U.S. private payrolls rose far less than expected in January. Investors also took stock of news the New York Community Bancorp, opens new tab cut its dividend and posted a surprise loss, renewing fears over the health of similar lenders.
The Labor Department said initial jobless claims increased to a seasonally adjusted 224,000 for the week ended Jan. 27. A separate report showed that U.S. worker productivity grew faster than expected in the fourth quarter. According to the CME Fed Watch, opens new tab Tool, traders now expect about a 70% chance of a U.S. rate cut in May, compared to 92% before the data. Lower interest rates boost non-yielding bullion's appeal.
Gold prices slipped on Friday as the dollar and yields jumped after a strong U.S. nonfarm payrolls report which created some uncertainty about whether the Federal Reserve might start cutting interest rates soon. U.S. employers added 353,000 jobs in January, beating the 180,000 economists had expected. A resilient economy and strong worker productivity encouraged businesses to hire and retain more employees, a trend that could shield the economy from a recession this year.
With a decline of less than 1% since the data, gold is "holding on like a barnacle despite a whopper of an employment report," said Tai Wong, a New York-based independent metals analyst. But we might need to wait a little and see if gold grinds much lower," added Wong.
"If these (interest) rates stay where they are and there is a lack of clarity around that, what we'll likely see is a rather muted environment for the upside for gold," said WGC market strategist Joseph Cavatoni.
World Gold Council View
Global gold demand excluding over-the-counter (OTC) trading fell by 5% from to 4,448.4 metric tons in 2023 but remained strong compared with a 10-year average due to geopolitical and economic uncertainty, the World Gold Council (WGC) said on Wednesday. Ongoing conflicts, trade tensions and over 60 elections taking place around the world are likely to support demand this year and compensate for a potential hit to jewellery purchases amid high prices and economic slowdown, it added.
Including demand from the OTC markets and other sources, total demand climbed by 3% to a new annual record at 4,898.8 tonnes and supported the growth of the 2023 average gold price to a record high of $1,940.54, the WGC said in its quarterly demand trends report. Gold prices hit a record $2,135.4 per troy ounce in December and have held above the $2,000 psychological level so far this year. The latest Reuters poll expected the precious metal to average $2,053.5 an ounce in 2024.
Annual demand growth in the OTC market hit 753% last year, the most since at least 2011, WGC data showed. Investors are expected to continue accumulating gold at an accelerated pace this year, largely driven by the Federal Reserve’s expected pivot toward easing, according to Cavatoni. Central-bank buying maintained a breakneck pace, with annual net purchases of 1,037 tons last year, just 45 tons shy of the record set in 2022, the WGC said in the report. It expects central-bank buying to top 500 tons this year.
The expected OTC spree, as well as central-bank buying, will provide a key counterweight to softness elsewhere, especially exchange-traded funds. That provides strong upside for prices, with a case for $2,200 an ounce or more, according to Cavatoni.
As the central bank buying streak continued on from 2022 "at a blistering rate," demand from this sector reached 1,037.4 tonnes in 2023, down 4% from the 2022 record year, the WGC said in its report. Even though it is not so strong as it was in 2022, it is substantially higher than prior to 2022 and it exceeded our expectations," said John Reade, market strategist at the WGC. "It is a very impressive number."
Purchases from central banks are expected to slow down by around 200 tonnes in 2024 but remain higher than prior to 2022, Reade said, adding that it was a conservative scenario, and that demand could speed up. In 2023, jewellery consumption was steady at 2,092.6 tonnes due to 17% post-COVID increase in demand in China and despite high gold prices, the WGC said. Buying of gold bars and coins fell by 3% as European demand continued to plummet, while outflows from exchange traded funds (ETFs) storing bullion for investors continued for the third consecutive year with 244.4 tonnes of decline, it added.
Two cents on the FOMC meeting
Yesterday we've discussed major economical issues, concerning NFP report and explained why, by our opinion it is, let's say, "not quite correct". By opinion of many economists (including us), the US economy continues (in our opinion, from the fall of 2021) to decline, which is masked by both underestimation of inflation and mechanisms for translating the growth of financial asset capitalization into GDP.
The US Federal Reserve's Open Market Committee did not change the key rate. The Fed's cover letter says:
- More balanced risks are emerging related to the US labor market and inflation;
- The Fed does not consider that it is advisable to start reducing rates until confidence in the trajectory of inflation to 2%;
- Fed's balance Sheet reduction continues (QT);
- It all depends on the incoming macro data.
At the press conference, Powell said (I would split it in groups):
Inflation
- I do not know how many months it takes to do this so that the Fed can gain confidence in 2% US inflation rate;
- We will not keep secret our belief in the inevitable 2% US inflation rate;
- I personally believe that we need to see CONFIRMATION that we are moving towards inflation.
- Progress on inflation is not guaranteed.
- ️We need more data on inflation than in the last 6 months.
- ️We do not declare a victory!
- I will start to worry if inflation persistently starts to stabilize at a level above 2%;
- ️If inflation rises significantly again from the current values—this will be an unpleasant surprise for the Fed;
Rate
- Today, no one suggested that the Fed should already start lowering the rate;
- We will cut rates if we see a weakening in the US employment rate;
- ️The rate is most likely at its peak values.
- ️We will lower the rate THIS YEAR if the US economy develops as we expect;
- ️Almost ALL Fed chairmen believe that it is worth lowering rates this year;
- MARCH—unlikely to lower rates this month. This is not our basic scenario.
- ️I plan to conduct thorough negotiations on the Fed's balance sheet in March(QT).
Note that although the rate was not changed, the policy of reducing the Fed's balance sheet (withdrawing money from the economy) continues. At the same time, Powell understands that the issue may have to be re-stored (pre-election year).
Powell explicitly warned that inflation could start to rise despite the Fed's policy. Well, what he will do in this situation-it is explicitly stated that decisions will be made according to the situation. If we could ask questions to Powell, then the main question would be: in what sectors GDP is growing and how the rate policy takes into account the length of the working week. Overall, the structural crisis in the global economy continues. And there is no reason to believe that the situation will change in the coming years.
The Fed's quantitative tightening continued in January. Total assets on the Fed's balance sheet fell $51 billion in December to $7.63 trillion, according to today's weekly Fed balance sheet. ️This is the lowest figure since March 2021. Since QE ended in April 2022, the Fed has reduced its balance sheet by $1.34 trillion. ️The Fed confirmed that it will continue QT for now in the FOMC statement and at Powell’s press conference, but at the same time, JPow said that they could start discussing the balance issue in March:
China Demand for Gold
In China, demand for gold jewelery is likely to remain stable, as consumers have sought to preserve value in the safe-haven asset against a weakening currency and an increasingly uncertain economic outlook. Chinese investors and households have been buying gold as a refuge from local property and stock market mayhem, helping to support record prices for the haven asset.
According to the WGC, Chinese demand helped push the gold price to record highs last month and keep it above $2,000 per troy ounce this year. Chinese investment demand for gold — spanning bars and coins — grew 28 per cent to 280 tonnes, largely offsetting a steep drop in Europe. The country’s jewellery consumption rose 10 per cent to 630 tonnes last year, even as global demand remained flat. Just for comparison, Russian individuals have bought gold just for ~ 98 tonnes this year.
“China was key to a lot of what was happening last year,” said Louise Street, senior markets analyst at WGC. “When you look at the consumer sector, China is not the price-setting factor but it is providing a floor.”
Due to huge personal savings, accumulated during pandemic on a background of collapse of real estate giants (such as Evergrande), and stock market in general (CSI 300) it is logical that people are searching assets that could preserve value and safe their money. Not only Gold but BTC as well have become a "safe haven", despite that investing in BTC is officially forbidden. Analysts at UBS said Chinese demand had been “under-appreciated” as a factor driving gold prices.
For the central banks per se, this is generally quite modest volume ~$65 billion per year (with foreign exchange reserves of almost $12 trillion). PBOC buys almost non-stop ~60 tons per quarter and in 2023 bought 225 tons. Here the question is rather not even in volumes, but in the synchronicity and rhythm of purchases - every quarter. This forms solid price support - the Central Bank is slowly and systematically buying, which, even at high rates, did not allow gold to fall. In 2023, demand increased in the over-the-counter (OTC) market (as shown above), where big money quietly buys large volumes without unnecessary regulation (~450 tons in 2023 - an increase of more than 8 times).
Considering that 2024 is a year of big risks: political (elections), geopolitical (Middle East, Ukraine, Taiwan, China-USA...), economic (stagnation/recession), financial stability risks (debts, liquidity, rates), Elections in the US, Russia etc. , in general, demand promises to be consistently high. Although positive real rates limit the growth of gold, a reversal of the Central Bank could add momentum... but for now the market is overly optimistic in terms of expectations for a rate cut, let's see what the Fed says today. In any case, Central Bank purchases and a wide range of risks will likely continue to act as strong support for gold prices.
Besides, as we've mentioned in our previous reports, the situation with real interest rates could change. Here we can personally observe the behavior of investors who previously invested in over-inflated technologies, and as soon as the crisis came, they ran not into real estate, but, first of all, into gold. Well, and in crypto. So everything is going as we've mentioned even last year:
In general, there is still some belief that the old mechanism is still working; only large, including state, institutions are carefully merging their positions in treasuries. Here both China and the Arabs made their mark. But when the rate goes down due to problems in the economy and financial sector, and inflation becomes higher than the rate, then everyone will finally understand that the old mechanism and agreement has ceased to work and it is necessary to look for a new instrument for saving value. As usual, there are three candidates - gold, commodities (which, in fact, will further accelerate inflation and reduce added value in other parts of the value chain) and, oddly enough, BTC. While the latter is not the most obvious candidate, the “BTC as a store of value” narrative is heating up.
Few other issues to mention
Here we talk just briefly. Shares of New York Community Bank, $NYCB , the bank that acquired failed Signature Bank, fell 40% after suffering losses. The bank announced that they would cut their dividend by 70% to comply with regulatory requirements. They also reported a Q4 loss of $260 million. This comes just weeks before the Fed's emergency lending program expires. Moody's could cut the rating of the bank to junk level.
The banking “disease” from March 2023 has not gone away. In the USA, 10 months later, a second wave of bank collapse began (regional banks tied to real estate). Paper losses of American banks on office real estate already exceed a trillion dollars. And Powell’s support program will end in 1.5 months. Along with them, the Japanese Aozora Bank, which invested heavily in American commercial real estate, also falls:
It would seemed, NYCB that took over the ill-fated Signature Bank reported a small profit and reduced dividends (it didn’t even refuse due to losses) and the shares of regional banks are diving down. But, in fact, they are not threatened by the fall of shares, but by the potential outflow of deposits. Now, until March 11, while BTFP is in effect, they can still attract liquidity in case of flight.
After March 11, they will have to go to the Fed and pledge their assets there in order to attract money, but not at par value (as now for treasuries and mortgage securities), but at the market value (i.e. their balance value). And this, no matter how hard the Fed tries, will be a sign of an unhealthy situation for other banks, because only those who have saved themselves to the maximum resort to the discount window. So interbank repo will be closed for them, and this could be worse than the flight of depositors.
The UAE is becoming the world's largest financial intermediary. Now with the creation and launch of a settlement and payment system independent of the US and EU (this will take a couple of years, maybe less, given the degree of readiness of national payment systems in all countries, as well as the digital ruble in China, India and Russia), the dynamics can be very impressive.
And the last one - just the chart - inflation is defeated totally...
The United States and its allies find themselves in a new Middle East game in the role of wingmen: politicians and the military are forced to make move after move, but each new move worsens the situation. In chess, this position is called "zugzwang". Maintaining a presence in the Middle East for the United States means getting involved in a new war, for which there is neither money nor resources, which is guaranteed to lead to defeat. However, abandoning the war means leaving the region, like Afghanistan, and this means losing control over the largest oil-bearing region on the planet and the most important logistics hub. Thus, the game can no longer be reduced to a draw. For the United States, the loss of the Middle East would be a blow comparable to the withdrawal of Soviet troops from the GDR.