Banks have a problem: Commerzbank, Deutsche Bank, Desert Gold

Commerzbank: DAX climber has done a lot right

The current week started well for the shares of Deutsche Bank and Commerzbank: UBS issued buy recommendations for both financial institutions. The target prices are both well above the current price. But how promising are the shares really? In addition to the interest rate turnaround, both stocks have recently been boosted by austerity measures. Commerzbank, in particular, has been cutting costs and is now being rewarded with a promotion to the DAX. Linde is being relegated to the second tier, the MDAX. At Commerzbank, net interest income already rose significantly last year. This year, the results should also be within expectations, giving the bank room for a dividend for the first time in a long time. The bank plans to distribute around one-third of its profits to shareholders. The stock currently looks promising: At almost every time level, the Commerzbank share is reaching a new high.

The performance of Deutsche Bank has also been positive recently. The stock is now trading only around 8% below its five-year high and, like Commerzbank, could leave the share price weakness of recent years behind. At Deutsche Bank, too, profits are rising - thanks in part to investment banking. However, analysts continue to criticize the poor returns. Volatile exchange rates could also become a burdening factor for banks in general. In recent months, Commerzbank, for example, posted short-term book losses due to loans in Swiss francs, but thanks to positive market developments, these ultimately did not have an impact.

Is confidence in leading currencies continuing to wane?

Even if the outlook for banks seems generally positive, there are also negative signals for the business of traditional financial institutions. The major central banks, such as the ECB, are increasingly in the red because of rising interest rates and the numerous bonds with low coupons on their balance sheets. This is weighing on the major leading currencies, as is the loss of confidence in Asia: many observers, such as Ronald Stöferle from the asset manager Incrementum, see currencies such as the euro under pressure. The reason for this is the frozen Russian currency reserves, which are causing Asian economies, in particular, to doubt the security of such reserves. Gold, in particular, has benefited in recent months - gold reserves at central banks are currently at 35,500 tons, as high as they were in the mid-1970s. Surveys among central banks also indicate that the monetary guardians see gold as a solid substitute currency in the coming months.

Desert Gold: Share price down - drill results ahead

Instead of jumping on the bandwagon after months of gains in bank stocks, investors may also be targeting gold. Canadian company Desert Gold operates in Mali on the border with Senegal, where it is developing the huge SMSZ property. Existing mines, such as those of Barrick Gold, B2Gold and Allied Gold, are in the same geological trend. Desert Gold has already drilled diligently in recent years and now reports more than one million ounces of gold in a resource estimate.

In February, the Company started a drilling program to raise further potential on the 440 sq km property. This time, the main target of the drilling is the Mogo South area in the southeast of the property. "The drill program at Mogo South is the first step in trying to answer one of the most important questions regarding the SMSZ project: does Mogo South have the potential to become a multi-million ounce gold deposit consistent with regional gold occurrences near the Senegal-Mali shear zone?" commented Desert Gold CEO Jared Scharf. Desert Gold's share price is at year-to-date lows. Experienced investors with staying power may want to take a closer look. If precious metals pick up, the share should benefit disproportionately. A good overview of the Company can be found in the latest company presentation, available as a video.

For several reasons, it could be likely that gold will soon continue its upward trend, which was dominant at the turn of the year: Inflation remains high in many currency areas. In the 1970s, too, the gold price climbed only with a delay after inflation had already picked up significantly before. The support from central banks for precious metals is also likely to support the prices of gold and Co. In addition, the mood on the stock market is also brightening - gold stocks such as Desert Gold could, therefore, soon wake up from their deep sleep. Given the low liquidity of the shares, however, investors should work with tight limits and not pay any premiums to the leading exchange in Canada.