New York State regulators closed Signature Bank on March 12, 2023, in what is now the second-largest bank closure for the crypto industry and the third-largest bank failure in U.S. history. With thousands losing their funds, investors are increasingly concerned with how this could impact the economy and are turning to alternative investments to keep their wealth safe.
Keep reading to learn more about what’s happening with Signature Bank, its economic impact, and how to protect your wealth.
What Led To The Collapse of Signature Bank?
After Silicon Valley Bank’s failure two days earlier, fear sparked through Signature Bank’s customers, causing them to question their confidence in the bank’s leadership, according to New York officials. The bank abruptly experienced a mounting run on deposits, where an influx of customers simultaneously made large withdrawal requests beyond what the bank could pay using its cash reserves.
The bank sold $21 billion of its securities portfolio to help meet its obligations at a loss of $1.8 billion. The drain on equity capital led the lender to try to raise over $2 billion in new capital, but it was too late to stop the bank from being seized. It became increasingly difficult for Signature Bank to stay afloat, leading to its collapse.
The collapse of Signature Bank created a banking crisis that prompted the Federal Reserve and Treasury to create an emergency program to backstop all deposits at both banks using the Fed’s emergency lending authority.
What About Those That Didn’t Withdraw Their Funds In Time?
The Federal Deposit Insurance Corporation (FDIC) has a set limit on how much deposit insurance it covers, with a maximum of $250,000 per account holder. Unfortunately, those individuals and businesses with balances over this limit and who didn’t withdraw their funds in time suffered. The FDIC didn’t protect their funds, and they lost any money exceeding the $250k limit when Signature Bank closed its doors.
Although there was an opportunity for another institution or individual to purchase Signature Bank, no one stepped forward, adding it to the list of banks that have failed due to financial difficulties in recent years. Its failure emphasizes how important it is for customers to be aware of deposit insurance limits when choosing where to keep their money.
What Investors Are Doing To Protect Their Wealth
Many investors have begun exploring alternative investment options to hedge against the growing market uncertainty. Gold and silver are among the most popular options currently, which can be reflected by the sharp increase in the price of gold.
Gold has been a reliable currency for centuries and has historically maintained its value regardless of how the stock market performs. This makes gold ideal for diversifying investment portfolios and guarding against unexpected economic changes. Investing in gold can provide stability and security to any portfolio while also providing protection from inflation or devaluation of other forms of currency.
Gold typically remains liquid even during turbulent economic conditions. It can easily be exchanged or traded for goods and services, giving it great value. When traditional currencies become unstable, investors can rely on their gold investments as a form of payment instead.
How The Signature Bank Closing Affects The Price Of Gold
The banking system’s uncertainty has led to expectations that the Federal Reserve could pause its interest rate hikes, making zero-yield gold a more attractive investment in a low-interest rate environment. Customers are turning to gold due to its historically stable value and status as a safe haven asset during economic uncertainty.
This has caused a dramatic surging effect on the price of gold, skyrocketing to its highest levels in over five weeks, reaching nearly $1,900. Analysts at ANZ have noted that the short-term outlook for gold looks strong, with investor allocation relatively low and the metal having jumped above its 50-day moving average, signaling a change in momentum.
In addition, gold traditionally tends to perform well during times of market instability or economic crisis, and this banking crisis is no different. Gold has just recently hit a four-week high at the time of writing and is showing no signs of slowing down.
The Most Common Ways To Invest In Gold
While several investment vehicles are available for investors looking to shift their assets to precious metals, there’s nothing quite like owning physical assets. Whether you’re interested in storing gold in your home or a custodian-held Gold IRA, you have options.
Buy Physical Gold Bars And Coins
Although holding physical gold bullion may seem old-world, it’s still a tried and true way of investing in the precious metal. Physical gold coins and bars come in various sizes, making them accessible to investors with varying budgets. Once purchased from banks, mints, or online dealers, gold can be stored securely at home or in vaults for added protection.
As a tangible asset that can’t be replicated with other investments, physical gold gives investors direct control and eliminates any potential worries of fraud or tampering. This especially appeals to those who want more security as they can store the gold in their home and access it anytime.
Invest In A Gold IRA
With the current state of the economy, it can be difficult to predict how traditional stocks and other investments will perform. Diversifying your portfolio by buying gold in a Gold IRA can help safeguard your retirement savings from unexpected volatility in traditional markets.
Gold has historically held its value over time, making it an enticing option for investors looking to stabilize their portfolios. Being a self-directed retirement account gives investors more control over their decisions while protecting against potential market fluctuations due to economic conditions such as inflation and currency devaluation.
Gold IRAs also provide investors with a tax-advantaged way to buy physical gold in a retirement account. This makes Gold IRAs excellent for long-term financial planning and short-term wealth preservation.
Invest In Precious Metals With Noble Gold Investments
If the thought of banks closing is concerning, diversifying your investment portfolio with alternative asset classes like gold can help shield your wealth from market volatility and preserve it for future generations. With gold prices on their way to record highs, now may be an opportune time to purchase gold and incorporate it into your investment strategy.
For more information on purchasing coins and bars to keep at home or opening a Gold IRA, contact Noble Gold today. One of our experts can help you get started, so give us a call at (877) 646-5347.