There are rumors that the crash in precious metals has rendered several financial firms “insolvent.”
The reality is that while stocks have hit new all-time highs, things have been troubling for the banks/ financial firms “behind the scenes” for months now. Indeed, it is striking how few investors are aware of these issues.
Specifically, the Fed has been forced to funnel tens of billions of dollars into the banks via its overnight repo window for months now. To put this into perspective, the ONLY time the Fed was funneling more money into the financial system via this facility was during the depths of the pandemic.
See for yourself.
Also note, that while the S&P 500 has soared, Financials have been collapsing. The Financials ETF (XLF) has been in a free-fall since the start of the year. Something BAD is brewing here.
Finally, and perhaps most concerning is the fact that JP Morgan (JPM) which is the best of the best of the banks has broken below its 50-day moving average (DMA) and is about to test its 200-DMA for the first time since the tariff tantrum. Again, something BAD is brewing in the financial system. If the gold standard for banks is correcting, you know there’s trouble afoot for the smaller players.
In this context, it’s quite possible that the crash in precious metals could actually render one or more banks insolvent. Silver collapsed 30% in a single day. Gold dropped 12%. Any firm that was playing these metals with leverage could be in VERY serious trouble.