Here's Why Investors are Turning to Gold and Silver After Silicon Valley Bank and Signature Bank FDIC Backstop

Global financial markets started to panic last week after Silicon Valley Bank — SVB Financial Group SIVB — the 16th largest bank in the U.S. with over $200 billion in assets under management, collapsed on Friday, March 10, 2023. It was the second-largest bank in history to fail, just behind Washington Mutual Bank, the largest savings and loan company in the U.S. at the time that fell apart in 2008.

The crisis has already raised warnings about possible contagion spreading to other companies and banks. 

The U.S. government’s response is starting to take shape after a joint statement from Secretary of the Treasury Janet Yellen, Federal Reserve Board Chair Jerome Powell and Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg came out on Sunday. 

The Treasury Department will ensure that “depositors will have access to all of their money starting Monday, March 13,” even though most deposits were uninsured. The statement added  that “no losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

Opinions on the government’s plan are mixed. Some praised its quick and efficient effort to halt potential contagion. Others saw it as an overreaction and feared that the massive scale of the move indicates that the Treasury Department believes the problem is worse than it seems.

Many investors are already looking to take advantage of the crisis. Some investors with high conviction are shorting the market directly for high potential profit but incurring a significant risk of losing the investment. Investors with lower risk tolerance are moving to safer investments that aren’t heavily correlated with the success of the stock market. 

Many investors classify precious metals like gold and silver as great safe-haven investments, especially in the short term. The metals’ status as a hedge against inflation, store of value and safe-haven asset makes precious metals a popular investment in times of economic uncertainty.

This increased demand can drive the price of gold and silver up if supply stays the same or wanes. The price of both gold and silver has already started to surge since Friday. Now that the IRS allows investors to buy precious metals in an IRA, investors can get tax benefits on top of the purported safe-haven status of the asset.

You can learn more about investing in gold, silver and other precious metals (with or without an IRA) at Benzinga’s Precious Metals Hub.