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How do Bank Closings Impact the Price of Gold? 

The closing of a bank can impact the gold spot price in several ways. Although the relationship can be somewhat indirect, bank closings can lead to a rise in the price of gold when enough banks close at once or if one bank is large enough to stir uncertainty. 

Ways That Bank Closings Impact the Gold Price 

Investor Sentiment 

One of the biggest risk factors for closed banks is the way they can shape investor sentiment.  

When numerous banks close, it tends to foster an attitude of increased risk aversion among investors. This risk aversion is a response to uncertainty in the market.  

As investors allocate more capital for safe-haven assets like gold, the price of gold grows. This can also lead to cyclic behavior, wherein the growing price of gold results in a greater frequency of gold purchases, which, in turn, impacts the price of gold. 

It should be noted that single bank closures do not always have a noticeable effect on the live spot price of gold.  

Weakened Confidence in the Dollar 

Bank closures can erode confidence in fiat currency like the dollar. This is especially true when closures happen as a result of economic uncertainty since many investors see gold as a reliable store of wealth. This increased demand for gold also has an impact when enough investors turn to safe haven assets. 

How Many Banks Have Closed in the Last 20 Years? 

Year Number of Bank Closings Average Gold Price Per Ounce 
2023 $1940.50 
2022 $1800.10 
2021 $1798.60 
2020 $1887.60 
2019 $1514.75 
2018 $1279.00 
2017 $1302.80 
2016 $1141.25 
2015 $1060.83 
2014 18 $1183.40 
2013 24 $1205.90 
2012 51 $1675.20 
2011 92 $1568.55 
2010 157 $1421.45 
2009 140 $1097.35 
2008 25 $881.45 
2007 $833.70 
2006 $636.80 
2005 $516.60 
2004 $438.10 

Comparing the gold spot price to the number of bank closings by year, there is a correlation between the two. It may not be a direct cause-and-effect relationship, and if there is a cause-and-effect nature, it is one-sided. 

It may be more accurate to draw the conclusion that economic instability itself impacts the gold price and that bank failures are symptomatic of high volatility. 

Notable Bank Closings That Precipitated Gold Price Movements 

The Great Depression 

In the Great Depression, more than 9,000 banks closed. About 4,000 banks closed in 1933 alone and in 1933, the price of gold jumped from just over $20 per ounce to $33 per ounce, representing close to a 60% increase in price. More than $7 billion in depositor assets were lost in these closures, which represented between one third and one half of all financial institutions in the United States. As this was before depositor protections were put in place during the New Deal, banking customers took a collective loss. 

The Great Recession 

Between 2008 and 2012, the Federal Deposit Insurance Corporation closed 465 failed banks. During the Great Recession, there were fluctuations in the price of gold but overall, it rose by nearly $1,000 from start to finish. There were numerous forces at play but banking woes, impacted by the housing crash, held sway on the economy. 

Silicon Valley Bank Closure 

The Silicon Valley Bank was the 16th largest financial institution in the United States before its close on March 10, 2023. Gold prices increased moderately following this, despite over 300,000 new jobs reported weeks prior. 

While individual bank closings may not always have a direct and immediate impact on the price of gold, they can contribute to broader economic and financial conditions that influence investor sentiment and drive demand for safe-haven assets like gold. 

Quick Guides to Investing

Step 1:

Why Buy Physical Gold and Silver?

If you are concerned about the volatility of the stock market, you’re not alone. The extreme highs and lows of the stock market often lead investors towards safe-haven assets, like bullion. Historically, the Precious Metals market has an inverse relationship with the stock market, meaning that when stocks are up, bullion is down and vice versa.

Step 2:

How Much Gold and Silver Should You Have?

This question is one of the most important for investors to answer. After all, experts suggest limits on how much of any types of investments should go into a portfolio. After deciding to purchase and own Precious Metals and considering how much money to allocate, one can then think about how much and what to buy at any point in time.

Step 3:

Which Precious Metals Should I Buy?

With the frequent changes in the market and countless Precious Metal products available, choosing investments can be difficult. Some want Gold or Silver coins, rounds or bars while others want products that are valuable because of their design, mintage or other collectible qualities. Also, collectors may shop for unique sets and individual pieces for their collections.

Step 4:

When to Buy Gold & Silver

After considering why, how much, and what Precious Metals products to buy, an investor’s next step is when to buy them. This decision requires an understanding of market trends and the impact of economic factors on precious metal prices.

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