A series of banking closures at the beginning of the year, which included the second-, third-, and fourth-largest bank failures in U.S. history, has left a long shadow over the banking sector. And if recent reports are to be believed, trouble in the banking sector may not be over.
Thankfully, with a little research and preparation, we have an opportunity to act now to help protect our own and our family’s financial well-being before any additional volatility comes our way.
Banks in the United States and abroad are still having issues.
On October 11, 2023, Bloomberg reported that some of the largest U.S. banks—JPMorgan Chase & Co., Citigroup Inc., and Wells Fargo & Co—collectively wrote off $5.3 billion for the third quarter of 2023, which the news agency called “more bad loans than they have [written off] since the early days of the pandemic.” Lenders are reportedly predicting potential issues from consumers with low credit scores affected by inflation, as well as mounting concerns from the commercial real estate sector.
Some banks also continue to experience liquidity issues, which contributed to this year’s banking failures. Metro Bank—Britain’s first new “high street bank” in more than 150 years—required an eleventh-hour capital injection to stay afloat as recently as October 9, 2023.
Banking volatility may contribute to further action by depositors.
In the aftermath of banking closures earlier this year, many businesses and consumers raised concerns about the potential vulnerability of their deposits because they had no guaranteed protection beyond the $250,000 guaranteed by the FDIC. In response, $871 billion in deposits was pulled from banks in the first half of 2023, according to an analysis of FDIC data by S&P Global.
While regulators are attempting to work with banks to become better prepared for any future crises, many consumers still see the banking system as vulnerable.
Now we must ask ourselves: If this uncertainty is likely to persist, and depositors are pulling their funds out of their bank accounts, where could they be putting that money instead?
Physical gold offers a time-tested store of wealth with impressive growth potential.
I’m not one to wait around and see what the future will bring. Instead, I like to perform my due diligence, do my research, and make the best decisions I can now to protect myself and my loved ones.
If I decide that some of my funds need to be removed from my bank, physical gold is one of the assets I would look to first as a store of wealth. While inflation only continues to erode the purchasing power of cash, the price of gold is still climbing over the long term. For example, gold’s spot price is approximately $1,900/oz. as of this writing. Were I to take $1,900 in cash out of my bank account and store it under my mattress, it almost certainly wouldn’t buy as much in 20 years as it could today.
But one ounce of gold? Between May 2000 and May 2023—years in which we experienced more bank failures, the Great Recession, geopolitical volatility, and a global pandemic—gold’s price rose by around 730%. In my opinion, that’s a level of wealth insurance paper assets like cash simply can’t provide.