The fall of Silicon Valley Bank and two other financial institutions in the US has reverberated through global markets. The recent action in the gold price shows that investors, spooked by the events across the Atlantic, have rushed to safety as they seek to protect themselves from the fallout.
The price of gold has jumped back above $1,900 per ounce in the past few days, leaving it trading close to its all-time high of $2,036/oz printed in July 2020 when the global economy was at the mercy of the coronavirus pandemic.
In sterling terms, the price of gold is trading at £1,564/oz, a shade below its all-time high of £1,577/oz recorded in January of this year.
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Gold price surges as demand grows
The gold price has spiked as demand for the yellow metal has surged in recent days. The Pure Gold Company, which specialises in helping investors acquire physical gold and silver, saw a 385% increase in new enquiries over the weekend and a 274% increase in investors purchasing physical gold on Monday, compared to the daily average in 2023.
Josh Saul, CEO of the gold investment firm, said: “Customers seem quite panicked. The collapse of Silicon Valley Bank has ignited renewed fears over counter-party risk and the memory of the 2008 banking collapse looms large.”
He went on to add, “Purchasing physical gold allows investors to move their wealth out of the banking system and protects it from most counter-party risk. Growth may not currently be the driving force behind gold purchases, but when market confidence falls there is often a rush to safe haven assets which can increase the value of gold.”
The recent events in the US only seem to have exacerbated a trend that’s been playing out for the past two years.
The Pure Gold Company has seen a 712% increase in people purchasing physical gold bullion for their pensions while selling equity holdings this year.
And it’s not just the Pure Gold Company that’s seen a jump in business.
Andrew Dickey, the director of Precious Metals Investment at the Royal Mint, recently revealed the Mint has seen a 202% increase in demand for physical gold and silver over the past year. Many of the Mint’s customers are younger investors who’re buying physical gold for the first time.
The World Gold Council has reported last year physical gold hit 4,741 tonnes, with demand led by global central banks, which bought more physical gold than at any point since 1967. Demand by retail investors hit a nine-year high of more than 1,200 tonnes.
What’s driving physical gold demand?
There’s always a spike in demand for gold as a safe haven asset in times of uncertainty, but the steady rise in demand for the physical metal over the past two years is notable.
Investors both large and small have been flocking to the yellow metal as they try and protect their purchasing power and wealth.
As Saul says, “Investors are already concerned about the economic outlook in the face of a continued cost-of-living crisis, inflation, recession fears, and the unrelenting geo-political situation. A bank collapse may just be the tipping point for some investors looking for a safe haven in the storm.”
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