Rate Pivot, Gold Boom and Failed Deals: Opportunities and Risks - Desert Gold, ECB, PayPal, iShares STOXX Europe 600 Banks

ECB Poised for Another Rate Hike: Banks Benefit—But Is the Big Rally Already Over?

The European Central Bank is poised to raise interest rates again. In September, it is expected to raise the deposit rate by 0.25 percentage points, from 2.25% to 2.50%. In a Reuters survey, 57 out of 69 economists anticipated this move. Inflation in the eurozone most recently stood at 2.9%, above the 2% target. High energy prices, in particular, are causing concern for monetary policymakers. The ongoing conflict between the US and Iran has driven up the prices of oil and other energy sources. At the same time, the European economy is proving to be more resilient than expected. As a result, there is even speculation in financial markets about whether the deposit rate could rise toward 3% by 2027.

For banks, higher interest rates are initially positive. Loans and interest-bearing investments yield higher returns, while the interest rates on many customer deposits often rise more slowly. This can improve the net interest margin—that is, the difference between a bank's interest income and its own interest expenses. This effect was a key reason for the strong recovery in European bank stocks. However, this advantage does not last indefinitely. If interest rates rise too sharply or remain high for an extended period, loans become more expensive for businesses and consumers. Demand for financing may decline, while the risk of defaults increases. What initially boosts earnings can later lead to higher loan loss provisions and weaker growth.

The strength of the sector is reflected in the broad STOXX Europe 600 Banks index, which can be tracked, among other ways, via the iShares STOXX Europe 600 Banks UCITS ETF (WKN: A0F5UJ | ISIN: DE000A0F5UJ7 | Ticker Symbol: EXV1). The heavyweights include HSBC, Santander, BBVA, UniCredit, BNP Paribas, Intesa Sanpaolo, ING, Barclays, Lloyds Banking Group and Deutsche Bank. The ETF rose 67% in 2025 alone and has gained another roughly 20% so far in 2026. Trading at around EUR 42.38, it is at its highest level since late 2007 but remains below its record high of EUR 55.42. Citi is therefore not warning against a new record but rather that the strong rally could be followed by limited upside potential and greater volatility.

Since the ETF also includes British banks such as HSBC, Barclays, and Lloyds, not all of its constituents are directly affected by the ECB. The interest rate hike primarily affects banks in the eurozone. These include Santander, BBVA, UniCredit, BNP Paribas, Intesa Sanpaolo, ING, as well as Deutsche Bank and Commerzbank. The figures for German banks remain strong. Deutsche Bank's after-tax profit rose by 10% to EUR 1.9 billion in the second quarter, primarily thanks to its investment banking division. Commerzbank posted a record profit of EUR 1.8 billion in the first half of the year. Its net interest income remained stable at EUR 4.1 billion despite previous interest rate cuts.

Desert Gold: From Explorer to Producer in a Record-Breaking Gold Market

The gold price has stabilized above the USD 4,000 mark and has recently even hovered around USD 4,500 per ounce on several occasions, providing gold companies with an excellent macroeconomic environment. During this phase, Desert Gold (WKN: A14X09 | ISIN: CA25039N4084 | Ticker: QXR2) is undergoing a strategic transformation from a pure-play explorer to a future producer. At the heart of this is the wholly owned SMSZ project, which, at 440 km², encompasses one of the most valuable and productive gold-bearing geological structures in western Mali, near the border with Senegal.

Following a controversial mining law reform in 2023, conflicts with established producers have now been fully resolved, as recently demonstrated by B2Gold's announcement regarding the Fekola project. As a result, the formerly high-risk premiums in the region are now gradually declining. To diversify the portfolio geographically, the attractive Tiegba Gold project in Côte d'Ivoire was also acquired.

To date, more than 20 gold zones have been identified in the West African SMSZ area, and a sustainable resource base of over 1.2 million ounces has been established. Operationally, management is focusing on the upcoming start of production at the Barani East gold zone site. A compact gravity plant with a daily capacity of 200 metric tons is scheduled to begin operations here in the third quarter of 2026. Although overland transport poses logistical challenges during the current rainy season, half of the components have already arrived at the prepared construction site. Financially, this step was supported by an oversubscribed CAD 7.18 million capital increase in the spring of 2026. The gold produced and the resulting initial cash flows are expected to finance further organic mine growth and the next drilling programs.

Despite the enormous operational progress, the stock, with a market capitalization of CAD 42 million (USD 30 million), shows a striking discrepancy with its fundamentals. A feasibility study confirms that the near-surface deposits alone, at a gold price of USD 4,070 per ounce, have a post-tax net present value of USD 124 million and a fantastic internal rate of return of 101%. With a current valuation of just under USD 9 per ounce in the ground, the stock is trading well below the industry-standard acquisition premiums. Analysts at GBC Research therefore recently reaffirmed their strong "Buy" recommendation and estimate the fair enterprise value at a price target of CAD 0.93 (USD 0.68), which is ambitious from today's perspective. As soon as initial gold production begins and generates rising revenues, this massive valuation gap in the capital market is likely to close rapidly.

PayPal: Takeover Collapsed and 13% Lost—Is the Plunge Exaggerated?

On August 28, 2026, PayPal (WKN: A14R7U | ISIN: US70450Y1038 | Ticker: PYPL) came under significant pressure. The share price briefly fell by about 14.4% and closed the week at USD 53.66. This makes PayPal one of the weakest major US stocks of the day. Year-to-date, the stock is down 6.54%; over the past 12 months, it has lost up to 22.44%. The trigger for the slump is the temporary end of takeover speculation. According to reports, the payment service provider Stripe and the private equity firm Advent International are no longer pursuing their plans to acquire PayPal. The offer, presented in July, was USD 60.50 per share and would have valued the company at approximately USD 53 billion. However, PayPal reportedly considered the price too low. In addition, regulatory issues reportedly complicated the talks. Since the offer became public, the stock had risen by nearly 30%.

As a result, attention has shifted back entirely to the company's core business. The latest figures continue to show both positives and negatives. In the second quarter of 2026, PayPal increased revenue by 5% to USD 8.68 billion. The volume of payments processed rose by 10% to USD 486.4 billion, and the number of transactions increased by 8% to 6.8 billion. Active accounts, however, remained virtually unchanged at 439 million. At the same time, profitability came under pressure. GAAP operating income fell by 5% to USD 1.43 billion. The operating margin decreased from 18.1% to 16.4%, while adjusted earnings per share declined slightly from USD 1.40 to USD 1.38. Free cash flow showed a positive trend, reaching USD 1.78 billion.

PayPal also repurchased USD 1.5 billion worth of its own shares during the quarter. For the full year, management raised its forecast for adjusted earnings per share to approximately USD 5.38. CEO Enrique Lores is counting on lower costs, a simpler corporate structure, and better monetization of Venmo, Braintree, and the traditional payment service. Nevertheless, the challenge remains significant. Apple Pay, Google Pay, and Stripe continue to gain ground in digital payments. PayPal must prove that its strong brand and 439 million active accounts can once again translate into higher, more profitable growth. With an expected price-to-earnings (P/E) ratio of around 10.9, the stock is valued lower than many competitors, but the discount also reflects the market's doubts.

The slump has also left its mark on the chart. At USD 54.34, the stock is well below the 20-day moving average of USD 60.02. However, the 100- and 200-day moving averages at USD 49.88 and USD 51.29 have held so far. The range between USD 51 and USD 54 is now particularly important. A break below this zone could end the recovery that began in late June, while a move above USD 60 would restore confidence. The plunge is thus primarily the result of faded takeover hopes. Operationally, PayPal remains profitable, is seeing growth in payment volume, and is generating strong cash inflows. For a sustainable recovery, however, the company must now demonstrate, on its own, that the restructuring is working and that PayPal can be more than just an attractive takeover target.

European banks are benefiting massively from rising interest rates, but some experts warn of declining credit demand and potential price corrections due to higher loan defaults. With the start of production in the lucrative gold market approaching, Desert Gold is poised for a revaluation, as the stock is currently trading well below its intrinsic value. PayPal suffered a sharp drop in its share price following a failed takeover and must now grow profitably under its own steam and continue the technical trend reversal that began in June 2026 following the latest price pullbacks.