Thirteenth month of war – banks helped gold to grow
Wojciech R. Bolanowski, MD PhD
Chief AI Officer, retail and digital banking, payments and fintech in EU, GCC, SEA, enthusiast of cross-border banking
March was not friendly to the dollar
Another month has passed and the war in Ukraine continues. There is no realistic way to end the conflict. Recently, United States expressed openly they would continue to support Ukraine in its struggle with money and equipment. The serious fight was continued yet without decisive outcome. At the same time US Dollar was losing against Euro, Bitcoin, Z?oty, and gold. It was similar to the beginning of the year, when all assets improved and regained some losses to American currency. It seemed that in February the downward trend was over, but eventually it came back. Gold was again a super star, gained the most, and secured its price on the level higher than before the outbreak of the war. Generally, dollar is still less impacted than other currencies, however Bitcoin has been climbing up for four months and partially closed the huge gap to fiat currencies.
Bankruptcies in the background
It is hard to claim that military events in Ukraine are the most powerful force shaping the performance of assets. For the long time Bitcoin was apparently immune to the war influence and driven by turbulent reality of crypto markets. Frequent problems with crypto-exchanges brought the Bitcoin price to lower and lower levels. It looks like “cryptowinter” is over and the time has come for regular currencies to shake. Banks replaced crypto-exchanges in the role of earthquake generators. The first wave of bankruptcies happened in America, and Silicon Valley Bank began the series. It became defunct on March10, 2023 impacting whole US banking sector with loss of trust and a few more banks closed. Therefore, the weak performance of US Dollar last month is not a surprise. Afterwards, similar problems broke out in other markets. In Switzerland Credit Suisse was forcefully acquired by UBS, with the huge subsidy from central bank. Swiss Frank is geographically, and economically closer to Euro than Dollar. With latest shock in German banking we could expect Euro fall in the nearest future. For today, dollar is still more impacted than European currencies. Another argument that Dollar wakening is related to the problems of banks is stronger performance of Polish Z?oty than Euro. Polish banks are not shaking as much as those of Eurozone.
War is less important than banking
Typically, Z?oty was losing more than Euro, being the currency of the country closer to the military conflict hence more exposed to it. The fact that in March Euro gained less than Polish money shows, that today performance of banking sector is more important for currency quotes than events of the war. Assets are now heavily related to the financial stability of the specific markets and the truth is that all financial markets are far from comfortable stability today. In this situation non-monetary assets perform significantly better that regular currencies. Gold and Bitcoin outperformed Euro and Z?oty, not to mention US Dollar. Bitcoin benefited from more stable cryptomarkets. Gold took advantage from troubled banks. The shiny metal was always an alternative to paper (or digitalized) money and it continues to shine when money is in trouble.
Assets in war. Chart showing relative change of the average market price of gold, Bitcoin, EUR and PLN; data source: xe.com
The monthly briefings about asset performance since the beginning of the war are available here:
Summary of January 24th ; 2023:
Summary of December 24th:
Summary of November 24th:
Summary of October 24th:
Summary of September 24th:
Summary of August 24th:
Summary of July 24th:
Summary of June 24th:
Summary of May 24th:
Summary of April 24th:
Summary of March 24th: