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According to reports, the $2 trillion venture capital industry could see a 25% to 30% portfolio cut in the wake of Silicon Valley Bank’s collapse — a potential $500 billion cut.

“In the wake of SVB’s collapse, we expect greater valuation scrutiny and disclosure, especially as significant ‘trust’ capital from pension funds flows into these markets,” Bloomberg Intelligence analyst Gaurav Patankar wrote in a note Friday.

Some venture capital and private equity firms are turning to strategies of “stretching” and “pretending,” meaning they hold assets or back capital to avoid real price discovery. Examples of this include NAV loans that allow the general partner to borrow from a group of portfolio companies within the fund, available partner-led secondary structures in which the fund sponsor invests in one or more of the funds it already manages, Asset sales to new funds, and alternative financing through private credit.

But these approaches can only delay but not deny the underlying problem of “flaky” and “unrealistic” risk valuations.

US consumer prices rose at the fastest pace in 40 years in February 2022, reflecting a sharp increase in energy and food prices as well as rising demand for goods and services as the economy recovers from the pandemic. This has raised concerns that inflation may be accelerating faster than anticipated, potentially leading to a sustained period of higher prices that could erode purchasing power and dampen economic growth.

The Federal Reserve has been closely monitoring inflation trends and has signaled that it may begin to raise interest rates sooner than previously anticipated in order to keep inflation under control. However, this could also lead to tighter financial conditions and potentially slower economic growth.

The inflation concerns have also led to increased volatility in financial markets, with investors closely watching economic data releases and central bank policy announcements for signs of potential shifts in inflation or monetary policy. Some sectors of the economy, such as energy and consumer goods, have been particularly affected by the rising prices, while others, such as technology and healthcare, have been relatively insulated from the effects of inflation.

Overall, the inflation concerns reflect a complex set of economic factors that are still evolving and could have significant impacts on the global economy in the coming months and years.

As the CPI is historically high, the US and other countries are starting to raise interest rates.

For example, in commercial real estate in Los Angeles, the sales volume of commercial mortgage bonds fell sharply due to rising interest rates, plummeting by about 85% year-on-year.

Adding to the pressure is a recent spate of defaults in the office and retail property sectors, making bond buyers more cautious.

This week, Bloomberg reported that Brookfield Corp., the parent company of the largest office landlord in downtown Los Angeles, has defaulted on loans related to two buildings due to falling demand for space rather than refinancing the debt.

Gold price is looking to build on the previous rally above $1,850 as bulls gather pace for the next push higher. However, the bright metal is struggling to find new demand as investors turn cautious and flock to safety in the US Dollar. Meanwhile, the US Treasury bond yields are holding near weekly lows, limiting any downside for Gold buyers. The US Dollar incurred steep losses on Wednesday as the mixed US ISM Manufacturing PMI data and US Federal Reserve (Fed) Minutes failed to impress.
Even though the Fed Minutes showed that the officials are committed to fighting inflation and expect higher interest rates to remain in place, markets continue pricing a dovish Fed pivot by the end of 2023 as recession risks amplify. Accordingly, attention now turns toward the US employment data, as it will provide further insight into the Fed’s policy path this year.

Gold Price: Key levels to watch

1. The gold price is challenging the bullish commitments at $1,854.
2. The last line of defence for Gold buyers is at the Bollinger Band one-day Upper at $1,845.
3. The next upside target is at the $1,860 round number.