Banking Crisis Drives Rush to Gold

Investors rushed to the safety of gold as several prominent banks failed and the federal government stepped in to bail out depositors, the worst threat to the banking system since the 2008 financial crisis.

Gold soared nearly $100 dollars the ounce over the course of two trading days, Friday, March 10, when Silicon Valley Bank failed, and Monday March 13, when the federal government was scrambling to control the fallout.

Silicon Valley Bank, which lent heavily to the technology start-up community, collapsed amid a run on the bank by its entrepreneurial clients. The bank had $175 billion in deposits, making it the second largest bank failure in U.S. history.

Amid fears of growing instability to the banking system, bank regulators on Sunday, March 12 seized New York-based Signature Bank, marking the nation’s third largest bank failure. Signature was a major lender to the volatile cryptocurrency industry. The bank had $88.6 billion in deposits.

The U.S. dollar declined amid the banking system jitters, a positive for gold since the precious metal is traded in dollars around the globe. Also bullish for gold, financial analysts were anticipating that the Federal Reserve Board might hold back on further interest rate hikes that could put additional pressure on the U.S. economy, which would help boost gold’s appeal to investors, relative to interest yielding securities.