Top Ways to Trade the Silicon Valley Bank Crisis

by | Mar 13, 2023 | Markets

Don’t buy into the rally just yet.

With the latest financial crisis, more downside is likely.

After Friday’s SVB Financial crisis, First Republic Bank shares were just halted after plunging 64%, or $52.41 a share. PacWest Bancorp (PACW) is down 30%. Western Alliance (WAL) is down 60% on the day. KeyCorp (KEY) is down 28%.

All as the Fed’s new backstop fails to soothe investor fears of what’s next.

“Most banks are solvent under normal circumstances. The problem is, pretty much no bank can withstand a full bank run,” said Steve Sosnick, chief strategist at Interactive Brokers LLC, as quoted by Bloomberg. “The FDIC action removes the idea of a deposit bank run, but what we’re seeing is an investor bank run,” he added.

As a result of all the chaos, gold prices are rocketing higher as a safe haven.

In fact, gold last traded at $1,905.134 – up about $29 on the day. Should the Federal Reserve decide to halt rate hikes to help with the crisis, gold could easily run well above $2,000 again. Also, according to Investing.com, “It looks for now as if the Fed’s rapid action may have forestalled a larger problem. What it also does, is make a 50 bps rate hike at the March FOMC meeting look fairly unlikely,” analysts at ING say.

That being said, investors can always look to popular gold stocks, such as Barrick Gold (GOLD), Newmont (NEM), Royal Gold (RGLD), etc., or even hot gold ETFs, such as:

VanEck Vectors Gold Miners ETF (GDX)

One of the best ways to diversify at less cost is with an ETF, such as the VanEck Vectors Gold Miners ETF (GDX). Not only can you gain access to some of the biggest gold stocks in the world, you can do so at less cost. With an expense ratio of 0.51%, the ETF holds positions in Newmont Corp., Barrick Gold, Franco-Nevada, Agnico Eagle Mines, Gold Fields, and Wheaton Precious Metals to name a few.

Sprott Junior Gold Miners ETF (SGDJ)

With an expense ratio of 0.35%, the SGDJ ETF seeks investment results that correspond (before fees and expenses) generally to the performance of its underlying index, the Solactive Junior Gold Miners Custom Factors Index. The Index aims to track the performance of small-cap gold companies whose stocks are listed on regulated exchanges.

Or, we can even look at a gold ETF such as the SPDR Gold Shares (GLD), which is the largest physically backed gold exchange traded fund (ETF) in the world.