• First Republic Bank collapsed, following the failures of Silicon Valley and Signature Bank
• Analysts point to rapid interest rate hikes as the cause of the collapse
• To safeguard against a threatened financial system, investors are turning to gold

First Republic Bank Collapse

The banking crisis continued as First Republic Bank collapsed. JPMorgan Chase is set to take on “all of the deposits and substantially all of the assets of First Republic Bank” after the Federal Deposit Insurance Corporation (FDIC) confirmed that the troubled bank had collapsed on Monday.

First Republic was America’s 14th largest bank as of the end of 2022. Its demise follows the collapse of Signature Bank and Silicon Valley Bank – the 2nd and 3rd largest bank failures in American history. First Republic had lost more than $100 billion of deposits in the first quarter of the year. The losses sent investors and regulators into panic mode.¹

Prior to the collapse, eleven larger banks had previously infused $30 billion of deposits into First Republic to buy some of its assets at above-market rates. But there was no saving the bank.

First Republic’s appeal for a government bailout failed. Instead, the government worked to protect depositors. The FDIC said, “All depositors of First Republic Bank will become depositors of JPMorgan Chase Bank, National Association, and will have full access to all of their deposits.”²

Analysts are laying the blame for the collapse on Fed Chair Jerome Powell and Treasury Secretary Janet Yellen. The bank carried billions in unrealized losses, due in part to its book of mortgages that were issued when rates were significantly lower. Rapidly rising interest rates decimated the value of First Republic’s holdings. The collapse of SVB and Signature, for the same reason, sparked a run on First Republic and its ultimate demise.

Effects of the Failure

Experts don’t believe the banking crisis will divert Fed policy. Inflation is still much too high, as the most recent GDP report showed. Hence, the Fed is still likely to hike rates at their next meeting, further endangering hundreds of other at-risk banks.

The bigger issue is how far will the banking crisis spread and how it will ripple throughout the economy. Almost 200 more banks are on the brink of collapse, including financial giant Deutsche Bank.^3,4 Cascading effects could include banks tightening credit. This could make it harder for people to get mortgages or credit cards, and for businesses to get loans. And that could lead to an even worse outcome – a prolonged and severe recession. ⁵

As the banking crisis threatens to destabilize the global financial system, the price of gold is predicted to hit all-time highs.⁶ As a result, Americans are facing a severe recession and a drastic loss in their savings. People who want to preserve the value of their funds should look to safe haven assets that exist independent of the banking system. To learn how precious metals within a Gold IRA can safeguard your retirement, contact us today at 800-462-0071.

Notes:
1. https://www.reuters.com/markets/us/white-house-monitoring-situation-first-republic-could-step-if-needed-2023-04-27/
2. https://abcnews.go.com/amp/Business/jpmorgan-chase-assume-deposits-republic-bank/story?id=98979305
3. https://theweek.com/finance/1021940/nearly-200-banks-at-risk-of-svb-type-collapse-study-finds
4. https://finance.yahoo.com/news/deutsche-bank-next-fall-worried-133438711.html
5. https://www.sfchronicle.com/tech/article/first-republic-bank-collapse-recession-17845950.php
6. https://www.cnbc.com/2023/03/22/gold-price-could-hit-high-amid-svb-credit-suisse-bank-problems.html

• In a rare admission, the Federal Reserve stated that a recession is likely in 2023
• A recession forecast is supported by several strong economic indicators
• Stocks will most likely fall further before they hit a bottom

Recession Predicted

Already stressed by banking turmoil, markets are dropping as the latest economic indicators point to a recession. In a rare admission, the federal government stated that we could be facing a downturn. The Federal Open Market Committee (FOMC) makes key decisions about interest rates and the growth of the United States money supply. They expect a recession before the end of 2023 based on several factors.

The FOMC isn’t alone in their prediction. The New York Fed’s Recession Probabilities Model suggests the odds of a downturn are at their highest since 1982. The model’s April reading shows a 57.7% chance of a recession. Their forecast matches private sector predictions. JP Morgan Chase says the chance of a US recession is greater than 50% before the end 2023.¹

Recession Indicators

Debt Ceiling – The deadline to raise the debt ceiling is rapidly approaching. Weak tax receipts may cause the Treasury to be unable to pay all the US obligations earlier than expected. If the debt ceiling isn’t lifted, an unprecedented default would result in a government shutdown and risk triggering a deep recession.²

Leading Economic Index – The Conference Board is a research organization. It counts over 1,000 public and private corporations and other organizations as members. Their Leading Economic Index (LEI) broadly tracks business cycles using 10 inputs from across areas such as manufacturing, unemployment, and interest rate spreads. The LEI saws its sharpest reversal on record outside of a recession dating back to the 1950s. Wells Fargo economists said it presents a “clear message” that a downturn remains ahead.³

Bond Yield Inversion – An inversion is when short-term Treasuries pay more than long-term Treasuries. It typically occurs when investors lose confidence in the economy. An inversion has preceded every recession since 1955. Today’s yield curve is more steeply inverted than it has been at any other point since 1960. A recession typically occurs about one year after an inversion. The curve first inverted in March 2022, which means we are due for a recession soon.⁴

Shrinking M2 Money Supply – The M2 money supply is a measure for how much cash is circulating throughout the national economy. It tumbled from this time last year.

Steve Hanke is a Professor of Applied Economics at Johns Hopkins University. He thinks “a U.S. recession is baked in the cake.” And said, “Due to the Fed’s monetary mismanagement, the M2 money supply is falling at its fastest rate since the 1930s. The quantity theory of money tells us that, with a 6–18-month lag after M2 drops, economic activity will slump.”⁵

Some government officials did push back on the idea that we are entering a recession. Treasury Secretary Yellen said the US economy will avert of downturn. However, her prediction track record isn’t exactly perfect. Last year, Yellen had said there would only be a “small risk” of inflation, and that it would be “manageable.” To which she recently commented, “Well, look, I think I was wrong then about the path that inflation would take.”⁶

What It Can Mean

Since 1948, bear markets have started before the onset of a recession. The National Bureau of Economic Research has yet to officially declare a recession. Therefore, the S&P 500 could reach new lows in the near term. No bear market in the last 75 years has reached its bottom before the beginning of a recession.

Billionaire GMO cofounder Jeremy Grantham said, “This one is pretty damn big. It’s bigger than 2000, because it includes real estate and bonds, and that one did not. The economy had a gentle recession. It had no problem with real estate. It had no problem with markdown of debt. And yet, the Nasdaq went down 82%, Amazon went down 92%, and the S&P went down 50%. Be advised, this is not a gentle setback like 2000.”⁷

Powerful signs are pointing towards a severe recession. People who are interested in protecting the value of their portfolios should investigate the benefits of precious metals. A Gold IRA from American Hartford Gold can safeguard your wealth through an extended economic downturn. Call us today at 800-462-0071 to learn more.

Notes:
1. https://markets.businessinsider.com/news/stocks/recession-economy-downturn-markets-conference-fed-inflation-stocks-business-cycle-2023-4
2. https://www.brookings.edu/2023/01/25/how-worried-should-we-be-if-the-debt-ceiling-isnt-lifted/
3. https://markets.businessinsider.com/news/stocks/recession-economy-downturn-markets-conference-fed-inflation-stocks-business-cycle-2023-4
4. https://www.fool.com/investing/2023/04/22/recession-indicator-been-100-accurate-since-1955/
5. https://www.theepochtimes.com/recession-risk-grows-after-money-supply-shrinks-at-fastest-pace-since-great-depression_5187430.html?welcomeuser=1
6. https://www.nbcnews.com/business/economy/treasury-secretary-janet-yellen-admits-was-wrong-inflation-rcna31416
7. https://markets.businessinsider.com/news/stocks/jeremy-grantham-stock-market-crash-real-estate-everything-bubble-recession-2023-3

 

• The banking crisis spurred gold demand in the first quarter of 2023 onto one of its highest levels on record
• Prices were bolstered by Russia acquiring sanction proof assets
• A gold buying opportunity presented itself as fears of continued rate hikes caused a price dip

Investors Flock to Gold

Gold saw one of its best quarters this year. Global economic instability sent investors flocking to the precious metal. State gold buying also bolstered demand. But fears of continued rate hikes caused a recent dip in gold prices. This dip presents investors with a tremendous gold buying opportunity.

Investors ran to gold to secure their wealth after the biggest banking meltdown since the 2008 Great Financial Crisis. As evidence, the US Mint saw historical demand for its gold bullion.

The Mint sold 215,000 ounces of gold in various denominations of its America Eagle gold coins. Those are the best March sales since 2018. In addition, the Mint had its best first quarter performance since 1999. They sold 435,500 ounces in the first three months of this year. March gold sales are up 38% from last year. Quarterly sales are also up.¹

The US isn’t alone in record gold sales. The Perth Mint sold the most gold coins since November. And their sales were up more than 54% from February. The managing director of Metals Focus said, “Coin and bar demand since the pandemic have been eye-watering high. Global demand for gold and silver are expected to remain healthy through 2023.”²

The demand for gold extends beyond individual and institutional investors. As China continues its gold buying spree, Russia is fervently building its own gold reserves. They are strategically investing in assets that can’t be sanctioned. Russia’s Central Bank Governor said, “We are building reserves based on what assets cannot be used for sanction pressure and how our foreign trade is changing.” Following Russia’s invasion of Ukraine, around $300 billion was frozen due to sanctions. That amount is about half of the country’s international reserves. The G7 has pledged to maintain sanctions for as long as the Ukraine war continues. Analysts expect Russia’s gold purchasing to continue for as long as sanctions remain.³

Price Dip Presents Buying Opportunity

After surging to near all-time highs, gold prices dropped below the key $2,000 level. The price dropped out of concern that the Fed won’t cut interest rates in the face of persistent inflation. The St. Louis Fed Chief said the Federal Reserve should continue raising rates. A stronger dollar reduces overseas demand for the greenback-priced gold. And higher rates blunt non-yielding bullion’s appeal.

Recent earnings reports and a stock market rally also put downward pressure on the price of gold. The chief market strategist at Blue Line Futures said, “Anytime you get earnings, you get a lot of people chasing individual stocks and that could also cause them to not invest so much in metal.”⁴

However, the head of commodity strategy at Saxo Bank said gold’s rally has only been delayed. There is a growing consensus that the Fed will be forced to relent on interest rate hikes. The banking crisis and a looming severe recession will compel the Fed to alter its policy.

The temporary dip in gold prices presents a buying opportunity for investors. According to technical analysis from the Daily Forex, gold prices are on target to hit record highs this year. People looking to safeguard the value of their portfolios from the current economic turmoil should learn if gold is right for them. You can speak to an American Hartford Gold precious metals specialist to see how a Gold IRA can benefit you. Call them today at 800-462-0071.

Notes:
1. https://www.kitco.com/news/2023-04-18/Investors-flock-to-gold-silver-bullion-to-protect-wealth-in-Q1.html
2. https://www.kitco.com/news/2023-04-18/Investors-flock-to-gold-silver-bullion-to-protect-wealth-in-Q1.html
3. https://www.kitco.com/news/2023-04-18/Russia-is-building-its-reserves-with-assets-that-the-West-can-t-sanction-says-central-bank-chief.html
4. https://www.reuters.com/markets/commodities/gold-drifts-lower-firmer-dollar-fed-rate-outlook-2023-04-19/

• The Consumer Price Index indicated that inflation rose more slowly in March
• Despite the slowdown, inflation is still punishing American consumers
• Even if the Fed slows interest rate hikes, current prices may be the new baseline

Inflation Still Rises, Albeit More Slowly

The most recent Consumer Price Index (CPI) indicated that inflation rose more slowly in March. Not that inflation decreased or even stopped rising. Only that the pace of price increases slowed down. So, while the news was positive for the Federal Reserve, it was no comfort to most Americans who are still struggling with high prices.

The Federal Reserve has set a target of 2% inflation. The current rate is over double that at 5%. CPI climbed 0.1% in March after rising 0.4% in February. The CPI slowdown is attributed to the dropping price of gasoline. After OPEC+ announced a production cut, this drop is predicted to be short lived. The rate of inflation is down from a peak of 9.1% in June of 2022, but the pain of inflation is still echoing throughout the economy.¹

While prices are growing at a slower rate, increases are not stopping altogether. The cost of essentials is still punishing consumers. Food prices, for example, climbed 10% in February and have been rising at double-digit rates since May of 2022. Additionally, rents had their largest one-month increase on record, and day-to-day living expenses are hurting Americans.²

Even as inflation continues to slow, it won’t reverse outright. Only in rare instances do prices decline on an annual basis. And this is not even a given during recessions. The bottom line is that the higher prices that have become a hallmark of the post-pandemic U.S. economy are here to stay.

Bankrate said, “The inflation we’ve seen over the past couple of years has increased household expenses and essentially set a new base, and those expenses are not going to fall in a broad-based way. They just might not go up as fast.”³

Inflation and the Fed

Analysts think the slowing pace of inflation may cause the Fed to slow their pace of interest rate hikes. As the market stress from last month’s bank collapses eases, economists expect the US central bank to raise rates one more time in May. Investors predict another 0.25% hike. After that, they could pause their fastest monetary tightening campaign since the 1980s in June.⁴

The most recent jobs report may hinder the Fed’s rate slowdown. The report showed that unemployment is dropping and over 1 million jobs were added in 2023. This is fanning the flames of inflation even as wage growth is declining. Basically, people are working more for less. This means that the Federal Reserve will likely keep raising rates. It has done so by 475 basis points since March of last year, from near zero.⁵

Rising costs for food, rent, and other daily necessities are taking a toll on household budgets. The Federal Reserve is likely to keep raising rates to combat inflation. Not only are these hikes impacting wage growth and job opportunities, but they are also causing banks to fail and stocks to crash. With no end to inflation in sight, investors should look for means to preserve the value of their portfolio. A Gold IRA from American Hartford Gold is designed to protect your retirement funds from inflation and soaring interest rates. Contact us today at 800-462-0071 to learn more.

Notes:
1. https://www.reuters.com/markets/us/us-consumer-prices-rise-moderately-march-underlying-inflation-still-hot-2023-04-12/
2. https://www.nbcnews.com/business/economy/inflation-rate-march-2023-is-it-better-or-worse-economy-rcna79150
3. https://www.nbcnews.com/business/economy/inflation-rate-march-2023-is-it-better-or-worse-economy-rcna79150
4. https://www.reuters.com/markets/us/us-consumer-prices-rise-moderately-march-underlying-inflation-still-hot-2023-04-12/
5. https://www.nbcnews.com/business/economy/inflation-rate-march-2023-is-it-better-or-worse-economy-rcna79150

• The collapse of Silicon Valley Bank was the 2nd largest bank failure in US history
• Stocks plummeted as fear of more bank failures shook the foundations of the global economy
• Investors flocked to gold, sending prices of the precious metal soaring

The Collapse of the SVC Bank and the Economic Effects

The collapse of Silicon Valley Bank, the 2nd largest bank failure in US history, sent investors and officials into a panic. Close to 190 banks could face Silicon Valley Bank’s fate, according to a new study.

Most of the money was not insured, as the FDIC only guarantees bank deposits up to $250,000. According to some reports, more than 90% of all deposits fell outside of that threshold, resulting in an “awful lot of people losing an awful lot of money”. It’s highly probable that those people will never see that money again.

Fears of a global financial meltdown like the 2008 Financial Crisis are growing. More bank runs could decimate even insured depositors as the FDIC exhausts its emergency funds.

Stock prices are plummeting as the contagion spreads around the world. Credit Suisse bank had to be bailed out, leaving $17 billion of its bonds worthless. Economic conditions hold a frightening resemblance to the Lehman Brothers collapse that ignited the Great Recession.

That crisis saw the value of retirement funds drop in half after the Dow crashed nearly 7000 points. However, during the same time, physical gold leapt from $650 to a historical high of $1950.

Precious metals are a proven hedge against financial turmoil. Gold exists independently of the banking system. Analysts predict the rush to the safe haven asset will send its price to new record heights. Acquiring precious metals could not only preserve your wealth but potentially earn you a profit as everything else crashes.

Contact us today at 800-462-0071 to learn how you can protect your funds with precious metals or a Gold IRA.

“Tucker Carlson Tonight – Second Largest Bank Failure”
Source: Fox News
Date: Mar 10, 2023
Link to the video: https://www.foxnews.com/video/shows/tucker-carlson-tonight

• Social Security recipients may by surprised with higher taxes this year
• The income threshold determining your tax burden hasn’t been raised in decades
• Beneficiaries can adopt strategies to reduce or avoid stealth taxes on their Social Security

Social Security Benefits Exposed to Higher Taxes

Some retirees could be in for a shock this tax season. Social Security recipients may experience a phenomenon known as “stealth taxes” on their benefits. Taxes are going up because the government hasn’t changed the Social Security income limit since 1984.

The government changed a lot of things in response to soaring inflation. They changed federal tax brackets and contribution limits for retirement accounts. The government also adjusted the size of the standard deduction. In addition, they raised the Social Security cost-of-living adjustment.

One thing they didn’t change was how much money you can earn before having to pay taxes on your benefits. The low-income thresholds are resulting in more and more seniors paying higher taxes.

Here’s how it works: depending on your income, up to 85% of your Social Security benefits can be taxed. The percentage of all tax returns with taxable Social Security benefits grew to 33% in 2017 from 7.4% in 1999. The Congressional Budget Office predicts that it will grow to more than 50% by 2046. This is a troubling trend for many seniors. They view it as discriminatory double taxation.1

Seniors are pushing for the income thresholds to be adjusted for inflation. Indexing the threshold to inflation would greatly reduce the number of people owing extra taxes. In fact, 58% of seniors are in favor of getting rid of the tax altogether. Social Security overhaul is particularly difficult because of a divided Congress. Any overhaul of Social Security needs bipartisan support.2

The SECURE 2.0 Act (SA 2.0) addressed issues around retirement. But it had unintended consequences. For example, SA 2.0 raises the age at which required minimum distributions (RMDs) begin from 72 to 73 in 2023. Advisors consider this a stealth tax increase. Retirees now have almost five more years of growth subject to taxation. This can potentially impact Social Security and Medicare costs.3

Planning for Taxes

Planning can address potential tax implications. SA 2.0 provides more catch-up provisions for those between the ages of 60 and 63. You can make a catch-up contribution of $10,000 to an employer-sponsored retirement plan starting in 2024. Be warned though. Catch-up contributions for higher earners can be forced into a Roth 401k. This contribution would be taxable income.

Adjusting withholdings can help reduce tax bills. Beneficiaries can consider having at least 10% withheld, or perhaps 12%. Relying on income sources such as traditional IRAs or 401(k)s may help delay claiming Social Security benefits. This can result in higher benefits for the rest of a retirees’ life.4

Stealth taxes on Social Security benefits are a growing concern for seniors. Inflation is already making life for retirees more difficult. And a divided Congress means there is little chance of the income thresholds changing anytime soon. Retirees can plan for potential tax implications. Advisors suggest moving funds into a Roth IRA so withdrawals aren’t subject to taxes. A Gold Roth IRA combines tax advantages with the wealth protection benefits of precious metals. Contact us at 800-462-0071 to learn more about how you can protect your retirement.

Notes:
1. https://www.usatoday.com/story/money/taxes/2023/03/16/unadjusted-inflation-taxes-social-security-hurting-seniors/11465773002/
2. https://www.usatoday.com/story/money/taxes/2023/03/16/unadjusted-inflation-taxes-social-security-hurting-seniors/11465773002/
3. https://www.advisorperspectives.com/articles/2023/02/20/beware-of-stealth-tax-increases-in-secure-2-0
4. https://www.cnbc.com/2023/04/05/social-security-benefit-income-may-lead-to-a-stealth-tax.html#:~:text=Not%20moving%20the%20brackets%20or,stealth%20tax%2C%E2%80%9D%20Freitag%20said.

• The Federal Reserve’s monetary policy is blamed for inflation, recession, and bank failures
• States are legislating gold as currency to undermine the Fed’s monopoly on money
• Gold stands to gain in value as more states adopt it as legal tender

States Look to Gold as Currency

From causing inflation, to crashing banks and forcing a recession, the Fed’s monetary policy is leading some states to turn to gold. Following in the footsteps of several other states, an Arkansas bill is proposing to make gold and silver legal tender. This would mean that Arkansans could use gold or silver coins as money instead of just as investment vehicles. State adoption of gold as a currency could have a widespread impact on the US economy.

The Arkansas bill is rooted in Article 1, Section 10 of the U.S Constitution. It states that “No State shall make any Thing but gold and silver Coin a Tender in Payment of Debts.” Advocates say this article allows states to coin their own currency from precious metals. The Arkansas bill would also repeal the state capital gains tax on gold and silver. This would reduce the transaction costs of using them as money. If the bill passes, the people of Arkansas could use gold and silver in everyday transactions.

In 2021, Arkansas repealed the sales tax on gold and silver, which set the foundation for this bill. Repealing those taxes was a step toward treating gold and silver as money instead of commodities. Arkansas is not alone. Utah, Wyoming, and Oklahoma have already passed similar bills. And eight other states currently have legislation pending. 1

A Counterbalance to the Federal Reserve

These bills aim to introduce competition into the monetary system and nullify the Federal Reserve’s monopoly on money. The Federal Reserve creates a monopoly based on its fiat currency. It can easily create money out of thin air without the backing of gold or silver. This devalues purchasing power over time. It also allows the federal government to borrow and spend far beyond what would be possible in a sound money system. Proponents are aiming for all 50 states to accept gold as currency. They believe the Fed would be nullified if that happens. As a result, deficit spending would stop, and individual financial freedom would increase.

Former US Representative Ron Paul said, “We ought not to tax money – and that’s a good idea. It makes no sense to tax money. Paper is not money, it’s fraud.”2 Americans are losing faith in the Fed as its policies are inflicting pain on every aspect of daily life. Voters are reaching a tipping point. They are feeling empowered to throw off the Federal Reserve. If that happens, the price of gold will most likely skyrocket. Demand for gold will dramatically increase. And soaring interest rates will no longer hold the price of gold down. Until gold becomes currency, investors can still reap the benefits of owning precious metals. A Gold IRA from American Hartford Gold can protect retirement funds from Fed-created threats like inflation, recession, and bank failures. Contact us today at 800-462-0071.

Notes:
1. https://worldpopulationreview.com/state-rankings/gold-and-silver-legal-tender-states
2. https://blog.tenthamendmentcenter.com/2023/03/arkansas-bill-would-make-gold-and-silver-legal-tender-in-the-state/