Centerfin Collective Weekly

Weekly Update April 14, 2023

Gold and silver surge, Big banks winning, Backlash against Macron

Gold and silver surging

Gold and silver traded higher during the week, with the former within striking distance of all-time highs. As a point of reference, the price of gold is up ~23% in the last six months, while silver is up ~38% during the same time. Gold, and to a slightly lesser extent silver, while having industrial utility, largely trade as safe-haven assets and are often used as a hedge for inflation. Like all commodities, given they are priced in US Dollars, they benefit from dollar weakness.


  • Gold and silver are both used in manufacturing in various industries, e.g. electronics, medical equipment, batteries, and solar panels
  • Gold and silver are also the oldest forms of money, and hence are often used as a store of value, and derive much of their value from this use case
  • This means gold and silver will usually spike during periods of uncertainty and are often used to hedge against inflation
  • While inflation was surging in 2022, the price of gold and silver remained flat, kept down by the tremendous appreciation in the value of the US Dollar
  • Since the beginning of 2023, while inflation has been coming down, the value of the US dollar has been coming down as well
  • Combined with the recent banking turmoil and continued geopolitical overhang, it has been a tailwind for the two precious metals
  • We also find it interesting that Bitcoin has continued its strong recent run given the store-of-value use case

Big banks are winning

The latest earnings season kicked off with a few of the large banks. It is early, but it is clear that bigger is better. In particular, JPMorgan reported record revenue during the quarter. With several regional bank failures recently, deposits are flowing to the safest banks. Big banks continue to pay little on deposits while lending at higher rates, generating record spreads. Guidance indicates that they will continue to generate strong net interest income (spread). This will help offset other parts of their business that are weak, including investment banking. The macro commentary from CEOs is that consumers and corporations are still healthy, but they are concerned going forward.


  • The regional banking crisis has led to deposits leaving smaller banks in favor of the largest and safest banks, such as JPMorgan
  • Customers are willing to earn little on their deposits for safety, allowing banks such as JPM to generate record revenue
  • Other aspects of banking, such as investment banking and lending, remain weak
  • Consumers and corporations are in good shape, charge-offs (losses from people defaulting on their credit cards) are not meaningfully higher. However, there is concern about the future
  • Big bank balance sheets are strong, which helps mitigate contagion risk
  • Investing in banks will be a stock pickers market as balance sheets, size, and regional exposure become increasingly important

Backlash against Macron

There was a backlash against French President Macron this week following comments he made during his visit to China. Macron, already facing pressure at home after raising the retirement age, made comments that mimicked China’s worldview and warned that Europe must resist following the US. He doubled down on his comments about the US again this week. Officials across both sides of the Atlantic criticized him over what they felt was too soft a stance towards China.


  • The tension between the West and East is at its highest level since the Cold War
  • Xi Jinping of China continues to woo international leaders as he looks to reshape the global world order
  • Of particular importance is China’s interest in taking back Taiwan
  • The US and Europe have thus far stated their explicit support for Taiwan
  • Comments like these from Macron complicate the situation
  • Outside the prospect of war with China, the impact of change in the global balance of power will be felt regardless in commodity prices, inflation, and interest rates

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