The Wrap: Gold Surges, Bank Stocks Sag & the FOMC Does Nothing

January 30, 2026 | This Friday’s edition of “The Wrap” features our view of the latest events in Washington and on Wall Street over the past week. Don’t forget to watch "The Wrap" on The Julia LaRoche Show every Saturday on YouTube to catch our discussion of what’s hot and what’s not in the world of finance and investing.

The big news for investors this week is precious metals. In January 2026, gold and silver prices saw dramatic surges, with gold gaining over 20% to reach record highs above $5,500 per ounce, driven by geopolitical tensions and growing currency debasement concerns. Silver outperformed gold, jumping nearly 50% to over $110 per ounce in early 2026, driven by intense demand and a generally weaker U.S. dollar.

As of late January 2026, bitcoin had experienced a significant decline when measured against gold, with the token-to-gold ratio falling by approximately 40% from recent highs to around 15.9 ounces. This drop indicates that gold has substantially outperformed bitcoin during this period. Remember, when the price of gold rises, the metal is simply reflecting the decrease in value of the exchange medium, whether measured in dollars or bitcoin.

As we’ve noted in The Institutional Risk Analyst, both gold and silver are long-overdue for a correction, but remember that global central banks remain buyers of gold and sellers of dollars. The demand/supply dynamic with silver is different, but both metals are reacting to dollar weakness and a lack of confidence in the ability of the US government to address fiscal deficits.  The value of central bank gold holdings now exceeds foreign holdings of US Treasury debt for the first time in decades.

We’ll be reviewing our precious metals surveillance group in a future issue of The Institutional Risk Analyst. Our Premium Service subscribers have access to our custom surveillance lists for banks, non-bank finance companies, mortgage companies and precious metals. 

The Federal Open Market Committee left the target for ST interest rates unchanged this week, confirming our view that there is no majority on the FOMC for further rate cuts. The comments this week by Federal Reserve Chairman Jerome Powell did nothing to instill greater confidence in the United States or reduce the level of LT interest rates: 

“The U.S. federal budget deficit is uncontroversially on an unsustainable path. The level of debt is not unsustainable, it's very much sustainable. But the path is unsustainable. And the sooner we work on it, the better. But, right now we're running a very large deficit at essentially full employment, and so the fiscal picture needs to be addressed. And it's not really being addressed. So that's important, I'm not in any way connecting it to some sort of near-term market event. But ultimately it's something we'll have to deal with, and in the end—in the end game, that's where you wind up is in some kind of a difficult thing. But that's not where we are, it's not where Japan is either. But, it's certainly not where we are right now.”

On Monday, Whalen Global Advisors will release our the WGA Bank Top 50 rankings for Q1 2026. The WGA Top 50 Bank rankings represent the best performers among more than 100 publicly traded banks over $10 billion in total assets. WGA scores the entire population of banks using a proprietary model where size is only one factor in the analysis. All of the constituents of the WGA Bank Top 50 are available to subscribers to the IRA Premium Service.

There continues to be an enormous amount of churn in the top 50 banks. Goldman Sachs (GS) and Citigroup (C) are the only two large institutions in the top 25 this quarter so far. Names like Lending Club (LC), which led the bank group in the second half of 2025, have since fallen back due to concerns about soft Q1 2026 guidance, concerns over core earnings missing expectations, and high share price volatility. SoFi Technologies (SOFI)  is another example of a bank group leader in 2025 that has fallen back.” 

We'd be looking for more earnings disappointments in the weeks and months ahead. For example, PennyMac Financial Services (PFSI) significantly missed Q4 2025 earnings estimates in Q4. The leading mortgage company reported $1.97 EPS (below $3.12–$3.23 estimates) and revenue of $538 million (below the $637–$639 million forecast).

Source: Google Finance

PFSI missed Q4 2025 earnings estimates due to lower mortgage interest rates, which caused margin compression in its lending business and reduced income from its mortgage servicing rights (MSRs). While production volume grew, faster-than-expected prepayments of loans reduced the value of the MSR. Despite the miss and the huge initial 22% stock drop, however, PFSI shares closed up 1.85% (at $146.98) due to optimism over future margins.

The fact that the Federal Open Market Committee is unlikely to cut interest rates in 2026 is another factor weighing on financial stocks. In a recent commentary published by WGA (“The Martyrdom of Jerome Powell”), we note that Fed Chairman Powell may remain on the Fed’s Board of Governors through the end of his term in January 2028. While Powell says that Fed officials should eschew elected politics, he seems to be preparing for a protracted standoff with the Trump Administration.

US banks and nonbanks are entering a period of increased uncertainty in terms of earnings and rising credit costs, yet another reason why financial stocks are retreating.  We published a comment on the risks to banks from loans to private equity funds (“Does Private Credit Hurt Bank Stocks?”). Bank credit costs have been so low for so long that they have nowhere to go but up.

There is an enormous amount of forbearance by large banks with respect to defaulted loans to private equity firms and other non-bank financial institutions (NBFIs). Notice, for example, that the S&P 500 is up more than 13% over the past year but the stocks of business development corporations, which lend to smaller private companies, are down 6% over the same period.

Source: KBW

The risks to banks from NBFIs have nothing to do with interest rates and everything to do with inflation ℅ the FOMC. We expect bank stocks to retreat in 2026 because investors suspect that bad news is coming in terms of interest rates and credit. The performance of bank stocks and most other financial assets in 2025 were driven by a speculative wave following the election of President Donald Trump, a wave that has largely subsided. Gold, on the other hand, is a measure of the credit standing of the United States.

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