Precious Metals Surge as Banking Collapse Continues

Remember when the collapse of Silicon Valley Bank was the second-largest bank failure in U.S. history? Happy Days.

Bullion.Directory precious metals analysis 05 May, 2023
By Isaac Nuriani
CEO at Augusta Precious Metals

But already there’s a new number two. Earlier this week, First Republic Bank snatched the silver medal from around Silicon Valley’s neck when it shuttered on Monday. The $230 billion in assets owned by the bank as of last month means First Republic now has the dubious distinction of being the nation’s second-biggest bank failure ever.[1]

For a slightly larger perspective, there’s this: Three of the four largest bank failures in U.S. history have occurred in just the last two months.[2]

Understandably, I’ve talked a lot about the banking system over that same period. This week’s article is on something of a different topic, however.

The reason I do bring up the failure of First Republic is because it underscores why concerns about the financial system persist – as well as the general air of uncertainty that permeates the retirement-savings atmosphere these days.

Uncertainty is a regular theme of these articles. But not without good reason, in my opinion. As it turns out, you don’t have to spend much time looking around at the current economic environment to recognize that uncertainty is a wholly legitimate concern.

In the last two years, the U.S. has seen the highest inflation in roughly 40 years along with the fastest rate-hike cycle over the same four decades.[3]

Our economy continues to feel the impact of numerous global stressors, as well: Global asset management firm BlackRock notes the pandemic, sharply rising geopolitical tensions and a secular shift toward deglobalization as just some of the worldwide influences intensifying the challenges on America’s economic home front. In its 2023 Global Outlook, BlackRock went as far as to suggest that this is “the most fraught global environment since World War Two.”[4]

In short, the signs of uncertainty are everywhere. And it seems retirement savers think so, as well. Perhaps one of the best pieces of evidence to that end is the frequency with which they’re looking for more information about gold right now.

How do we know? Recent reports say that Google searches for the term “How to buy gold” recently hit a record in the U.S.

It’s a simple measure, to the extent that it’s a measure at all. But it does seem hard to imagine there’s not something noteworthy about the fact that more people than ever before are looking online for ways to buy gold.

The Wall Street Journal certainly thinks there’s something to it. The paper devoted a recent article highlighting the current popularity of the “how to buy gold” search term. In doing so, the Journal detailed the apparent epiphany that some have had about gold – particularly those who’ve ignored it previously – and how that experience is translating into a much-greater level of interest in the yellow metal.

We’re going to take a closer look at that article, to include detailing what some of the profiled subjects have to say about their interest in gold right now. To be sure, the fact that search interest in gold is so high may be revealing in its own right. However, there might be even more to learn from those responsible for driving that search interest to record levels.

Let’s see what’s going on.

Kitco News: “How to Buy Gold” Was Searched More in April Than When Gold Hit All-Time High in 2020

It probably comes as no surprise to you that Google is the world’s number one search engine – by a wide margin. Currently, Google commands 80% of the search market share, and also has its digital arms wrapped around 95% of mobile traffic.[5]

So, when Google Trends – an application that analyzes the popularity of search terms – determines searches for the phrase “how to buy gold” reached record levels in April, it’s fair to conclude that a lot of people are interested in finding out more about, well, how to buy gold.[6]

According to Kitco News, the popularity of the term wasn’t even this great back in 2020, when gold set a new (and current) all-time price high.[7]

Historically, it would seem the mainstream school of financial thought hasn’t been particularly kind to precious metals. For example, it’s not unusual to find articles discussing strategies for protecting retirement accounts during downturns and periods of volatility make no mention of metals as an option.

But one of the benefits of the internet is that it is now easier than ever to learn about alternative assets such as gold or silver, even if they’re still out of favor with popular savings narratives. And currently, as rounds of volatility arising from banking-system anxiety and other sources of economic turbulence have made some concerned about their traditional IRAs and 401(k)s, precious metals have been on something of a tear.

Since Silicon Valley Bank headed into failure in March, gold has jumped 13% and silver has soared nearly 30%. And since last November, when signs emerged the economy might start heading back toward a more accommodative rate environment, gold has climbed 25% and silver has surged 37%.[8]

With precious metals standing out as a bright spot against a host of other assets beleaguered by the multitude of challenges facing the economy right now, it seems – as the Google Trends data would suggest – that American retirement savers are paying a great deal of attention.

One of those paying attention is Mitch Day, profiled in the Wall Street Journal article I referenced earlier. Day is just 27 years of age, and acknowledges that he previously dismissed gold as being generationally irrelevant. But it’s clear his feelings have changed.

“For a long time, I kind of figured, ‘Oh gold and silver?’ That’s kind of the old-guy thing,” Day told the Journal. “Sure, I’m not necessarily going to get rich buying gold, but it will hold that money in uncertain times better than a lot of other things.”[9]

Reiterating Mr. Day’s view of gold, the Journal noted that “he buys gold coins to preserve his wealth.”[10]

Precious Metals Investor: Gold Lets You “Densely Hold Wealth in Your Hands”

The same article also profiles Rob Saudelli, who has diversified into precious metals recently out of deference to the stability he believes it’s exhibiting. Saudelli related to the Journal that of his overall holdings, 10% is currently in gold and 14% is in silver.[11]

It seems that the recent performance logged by precious metals may have struck a chord with savers who previously gave gold and silver little, if any consideration. This includes even younger savers, such as Mike Day, who, by his own admission, previously disregarded gold in part because of the widely held perception that it’s an asset for “old people.” For “how to buy gold” to be at an all-time high in terms of search-phrase popularity suggests a not-insignificant number of those plugging it into Google are younger savers.

In fact, as further testimony to the depth of his recent “conversion” to being a precious metals investor, Day mentioned another feature of metals he finds attractive – one that “seasoned” metals owners historically have found to be appealing: “You can densely hold wealth in your hands.”[12]

So, is the intense interest in precious metals something that will pass as quickly as it seems to have appeared? Or might this be another sign that gold – and silver – are in the process of gaining a new level of traction in terms of how they’re viewed more broadly as savings assets?

Let’s talk about that just a little as we close out.

Gold Coin Sales Surged in March

A few months ago, Augusta Precious Metals’ director of education Devlyn Steele discussed the possibility that precious metals were on the verge of going “mainstream.” At the time, Steele pointed to a variety of reasons for considering such a development, including the record-setting accumulation of gold by the world’s central banks last year as well as the movement among state legislators to have gold and silver recognized as legal tender.

The surge in metals interest – illustrated in part by the all-time-high popularity of the internet search phrase “how to buy gold” – suggests that Steele may have been on to something. There are signs this interest is translating to “follow-through,” as well: In March, sales of American Eagle gold bullion coins – the nation’s official legal tender gold coin – hit their highest monthly total in more than two years. And sales of American Buffalo gold bullion coins reached their highest sales total in more than 13 years.[13]

As for where things go from here, the opinion of analysts seems to suggest those punching “how to buy gold” into their Google search engines could find they’re pleased they did so. In the estimation of some strategists, persistent anxiety over the financial system, recession expectations and the associated prospect of a more dovish tilt by the Federal Reserve on interest rates could provide a continued supply of energy to gold in the near-term.[14] Longer term, strategists’ contention we could face stagflation for years provides gold with an optimistic secular outlook, as well.

Looking more specifically at analysts’ projections, Bank of America’s Paul Ciana said recently gold and silver’s recent moves to the upside could signal the beginning of a bull run for metals that lasts two years.[15]

Chiming in with his own cheerful assessment on gold’s prospects, Bloomberg Intelligence senior macro strategist Mike McGlone said, “We see gold price potential parallels to the financial crisis, which would place the next key round number resistance toward $3,000.”[16]

Of course, no one can say with certainty how gold and silver will fare, going forward. But the uncertainty that characterizes the current economic outlook is likely a reason why precious metals are finding favor with so many. At such a period in economic history, one that strikes even the most experienced asset management firms like BlackRock as historic for all the wrong reasons, it’s understandable why a number of retirement savers are opting for a so-called real asset that, as Mike Day says, allows them to “densely hold wealth” in their hands.

[1] Karl Evers-Hillstrom, The Hill, “First Republic Bank collapse spurs fears for banking system, broader economy” (May 1, 2023, accessed 5/4/23).
[2] Ibid.
[3] Bureau of Labor Statistics, “Consumer Price Index Archived News Releases” (accessed 5/4/23); Nick Timiraos, Wall Street Journal, “Fed Set to Raise Interest Rates to 16-Year High and Debate a Pause” (May 1, 2023, accessed 5/4/23).
[4] BlackRock, “2023 Global Outlook” (accessed 5/4/23).
[5] Caroline Forsey, HubSpot, “The Top 11 Search Engines, Ranked by Popularity” (February 9, 2023, accessed 5/4/23).
[6] Anna Golubova, Kitco.com, “Google searches for ‘how to buy gold’ hit record levels in April as prices trade at $2,000” (April 25, 2023, accessed 5/4/23).
[7] Ibid.
[8] CNBC.com, “Gold COMEX (Jun’23)” (accessed 5/4/23); CNBC.com, “Silver COMEX (Jul’23)” (accessed 5/4/23).
[9] Hardika Singh, Wall Street Journal, “‘How to Buy Gold’ Hits a Google Record as Crypto Investors Chase World’s Oldest Asset” (April 24, 2023, accessed 5/4/23).
[10] Ibid.
[11] Ibid.
[12] Ibid.
[13] Mike Unser, CoinNews.net, “U.S. Mint Gold Bullion Coins See Explosive Sales in March” (April 14, 2023, accessed 5/4/23).
[14] Golubova, “Google searches for ‘how to buy gold’ hit record levels.”
[15] Neils Christensen, Kitco.com, “Bank of America is looking for $2,100 gold price by Q2” (April 5, 2023, accessed 5/4/23).
[16] Golubova, “Google searches for ‘how to buy gold’ hit record levels.”

This article was originally published here

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