Gold Hits All-Time High Amidst Bank Failures, Weakening US Dollar

The gold futures market hit an all-time high after the second-largest bank failure in U.S. history. Will the price ceiling become the new floor?

Gold Sets a New Record

Gold hit $2,081.82 per ounce in the futures market, briefly surpassing the previous high of $2,075.14.

The price in the physical market has not yet surpassed the record set in August 2020, but we are likely very close.

The new record came shortly after the collapse of First Republic Bank, the second-largest bank failure in U.S. history. First Republic joined the graveyard alongside Silicon Valley Bank and Signature Bank, all of which were considered premier banking institutions just a couple of years ago.

Banking Crisis Continues

Last Friday, the Federal Reserve reported that SVB’s recent collapse resulted from a failure to “manage basic interest rate and liquidity risk.” Apart from a few isolated cases, “our banking system is sound and resilient, with strong capital and liquidity.”

Apparently, First Republic customers were not convinced. Neither were the shareholders of Comerica, PacWest Bancorp, Western Alliance Bank, and Zions Bank, which each experienced a sharp stock sell-off this week.

Investors are pouring into gold to hedge against uncertainty, a weakening US dollar, and increased market volatility. It’s not just retail investors; institutional investors and central banks also want a piece of the precious metal pie.

What’s Next for Gold

Is gold on the cusp of an even bigger move?

The gold price has increased nearly 100% since 2015, but this is just the beginning.

In gold’s bull market from 2000 to 2011, the price increased 650%: $252.10/oz to $1,920.94/oz.

In its 1970’s bull market, gold increased 2,500%, from $35/oz to a peak of $875/oz.

The macroeconomic and financial environment has never looked more favorable for gold. Bank failures and market volatility are leading millions of investors toward safer alternatives. The Fed’s massive stimulus measures and the US government’s unprecedented spending during COVID-19 have created an environment of instability we will be grappling with for decades.

No one knows what lies in our future, but we do know one thing: Vaulted clients don’t need to worry about bank executives making terrible decisions with their assets, or central bankers running our currency into the ground.

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As always, thank you so much for reading – and happy investing!

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