The events of the past weekend have changed the entire investment landscape for, at the very least, the short and mid-term investor. When digested fully, you would certainly consider that long term investments may need a tweak or two as well. For informed GMRgold clients, the twin bank failures of Silicon Valley Bank Friday and Signature Bank on Sunday came as no surprise. We have been telling our clients about these very real possibilities on our website and in our articles and blogs as well as social media postings for the past several months.
Gold Shines Over Dual Bank Failures
Silicon Valley Bank went into receiver ship on Friday afternoon, followed by Signature Bank of New York on Sunday. The insolvency of SVB was blamed on a lack of diversification in its investment portfolio, specifically being on the wrong side of Treasury Yields. A position that caused suffering with each rate hike by the Federal Reserve. SVB recently reported a US$1.8 billion hit on the sale of some of those securities. When they were unable to raise capital to offset the loss, their stock began dropping. This prompted prominent venture capital firms to advise companies they invest in to pull their business from SVB. The attention had a snowball effect that led to a growing number of depositors withdrawing their funds to the point that the requests could not be satisfied.
Signature Bank, who had recently made a play to win cryptocurrency deposits, abruptly shuttered its doors on Sunday after regulators said that keeping the bank open could threaten the stability of the entire financial system. Signature Bank’s withdrawal tsunami could largely be credited to the panic around the SVB collapse. Small to Mid-Size banks tend to seek out niche lines of business rather than the gargantuan accounts courted by Goliath’s such as JP Morgan Chase and Bank of America.
As GMRgold has previously reported, there are US$19 Trillion Dollars in deposits in United States Banks. The FDIC is required by the Dodd-Frank Act of 2010 to fund the Deposit Insurance Fund to at least 1.35% of all insured deposits or US$256 Billion Dollars. Hmmm?
The depth of the weakness in our banking system is not known at this time. Treasury Secretary Janet Yellen inferred in a speech last week that she was following closely “a few institutions”. A glimpse at the announcements on Sunday by Fed Chairman Jerome Powell, and on Monday by President Joe Biden, left plenty for investors to digest. During his testimony before Congress last week, Powell declared the Banking System to be stable and indicated further aggressive interest rate hikes to combat stubborn inflation.
On Sunday, Powell reversed that position, saying there would be no increase in March as was previously suggested. Some analysts consider this a signal that these failures may not be isolated instances. President Biden on Monday assured all depositors that they would have access to the total balance of their accounts, including those beyond the US$250,000.00 FDIC limit. Some have raised the questions of why they exceed the limit, and why now.
While there is a new generation of investors that have no memory of the banking crisis of 2008, it is still fresh on the minds of those that lived through those trying times. The precious metals sector rescued savvy investors following the Lehman Brothers collapse and systemic failure of the banking sector. Gold increased over 150% during the next three years while the equities markets struggled to gain footing. It is always a good time to buy gold. Some times are better than others. And with the way things have been progressing, now may be the perfect time.
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If you are looking for a safe investment that will hold its value even in times of high inflation, precious metals may be the answer for you. Check out our FREE eBook to learn more about using precious metals as a hedge against inflation. Our team at GMRgold can help you get started with your investments and provide guidance along the way.
GMRgold was created to serve as a safe and stable diversification partner when buying, selling, and trading gold, silver, platinum, and palladium. Let us advise you on new products, portfolio diversification, IRA and 401(k) options, valuation of your collection, and other matters related to the precious metals market. Call us today at 877-795-9585 or fill out our online contact form to learn more about our solid solutions using precious metals to diversify your portfolio.