Troubles in the Banking System

Troubles in the banking system returned to haunt investors in March. Headlines of bank failures in the United States and Europe sent shockwaves across financial markets, but the panic faded quickly thanks to the forceful response by regulators.

The main casualty of this episode was the US dollar, which got battered by bets that the Fed will be forced to slash interest rates soon to prevent any further damage to the real economy. Both the euro and sterling performed relatively well, capitalizing on the calmer tones once the banking stress started to recede. Yet the real winner was gold.

The precious metal gained more than 7% during the month, riding a perfect storm of declining yields, a softer US dollar, and safe-haven flows.March was a tricky month to navigate. Following the upset caused by the bank failures, markets became very sensitive to any news around the events and any relevant update had a direct impact on the pricing.

Moreover, regular data releases were also weighted more than usual, adding to the overall market disorder. Consequently, March was characterised by heavy trading for the IXI strategy, induced by the ever changing market conditions. The Fund came unscatched out of the shambles, capitalising greater gains than losses during the volatile period and locking in a significant total return for the month.

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