Banks are Closing in Record Numbers. Silver and Gold are Soaring Accordingly.
US Banks closed over 700 branches. Bank of America sets Gold target of $3000 by end of 2024
About 2 years ago, my family of three moved from Denver (we were escaping the insane cost of housing where an ordinary 1200-square-foot home averaged close to $900,000)
We found a community in the South Hills of Pittsburgh with great schools and free-roaming wildlife like deer and turkey.
The area's reasonable neighborhood covenants protected family-owned businesses from getting devoured by big-box retail, and there were plenty of job opportunities.
However, the absence of a local Wells Fargo bank almost derailed our home-buying process.
A cashier's check is required when closing on a home, and we needed a local branch to purchase a modest brick home with a full basement for under $200,000.
This experience underscored the importance of local banking options in the relocation process.
Major Bank Closures
In the first nine months of 2024, US banks closed a total of 754 branch locations, significantly impacting access to banking services for many customers.
Bank of America led the closures, shutting down 132 locations during this period.
Other major banks also contributed significantly to the total:
U.S. Bank: 101 branches closed
Wells Fargo: 92 branches closed
JPMorgan Chase: 90 branches closed
TD Bank: 52 branches closed
The remaining closures were distributed among various other banks, including PNC, Citizens Bank, Woodforest, Fulton, and Capital One.
These closures have forced thousands of customers to travel further to access essential banking services.
California was the most affected state, with 86 branch closures
This wave of closures is part of a larger trend in the banking industry. For instance, in the second quarter of 2024 alone, the top five banks with the most closures shut down a net total of 148 branches.
Over the 12-month period ending June 30, 2024, these same five banks closed a net total of 492 branches
What does this have to do with Silver and Gold?
Everything.
Those of you who read this newsletter know I perseverate on these themes
The global financial landscape is undergoing significant shifts, with several concerning trends emerging.
The US national debt is approaching $36 trillion, with daily interest payments of $3 billion.
Many nations are divesting from US Treasuries and increasing gold reserves,
partly due to Saudi Arabia's move away from exclusive dollar-based oil sales.
Banks face stress from potential commercial real estate collapses as remote work reduces office demand and many office buildings are selling at over 60% off the last transaction.
The US's international reputation has suffered. The rest of the World knows US no longer is a manufacturing force and that it has involved itself in hundreds of unending wars leading countries to seek alternatives to avoid potential sanctions.
Plus they are just wanting the World’s Bully to go down.
Additionally, US laws protect banks from derivative exposure, using depositors' funds as collateral through the DTCC, a practice known as "Security Entitlement."
These factors combined paint a picture of growing financial instability and shifting global economic power dynamics
As some of you know I’m also a columnist for silverseek and here is what their TA staffer wrote today
Bank of America has set a price target of $3,000 for gold by Year End
With the U.S. national debt ballooning to over $35 trillion, analysts are starting to question whether traditional investments, like Treasury bonds, can still provide stability.
Can gold really replace Treasury bonds?
U.S. debt crisis
In a note titled “Is Gold a Safer Investment Than Treasuries?” Bank of America’s Commodity Strategist, Michael Widmer, said that fears over debt levels will be gold’s key driver.
Widmer explains that this is turning investors away from traditional safe havens like Treasury bonds. In his words:
“With lingering concerns over U.S. funding needs and their impact on the U.S. Treasury market, the yellow metal may become the ultimate perceived safe haven asset.”
Bloomberg Terminal Write up of the BOA Report
With the U.S. national debt ballooning to over $35 trillion, analysts are starting to question whether traditional investments, like Treasury bonds, can still provide stability.
The answer, according to Bank of America’s latest report, is simple: Gold is now the ultimate asset. The metal has already shot up more than 30% this year thanks to a variety of factors.
Interest rates are falling, central banks are buying up gold like it’s going out of style, and U.S. retail investors are jumping on the bandwagon. It’s a gold party all over.U.S. debt crisis
In a note titled “Is Gold a Safer Investment Than Treasuries?” Bank of America’s Commodity Strategist, Michael Widmer, said that fears over debt levels will be gold’s key driver.
The debt situation has gotten so bad that neither of the two leading U.S. presidential candidates (Kamala Harris and Donald Trump) has a plan to fix it. Certainly not one they’ve shared with the public.
Trump’s tax proposals alone could add about $7.5 trillion to the debt, while Harris’s plan would tack on another $3.5 trillion, according to the Committee for a Responsible Federal Budget.
Widmer pointed out that other countries are in the same boat. Climate change, aging populations, and rising defense costs are forcing governments everywhere to borrow more money.
Widmer explains that this is turning investors away from traditional safe havens like Treasury bonds. In his words:“With lingering concerns over U.S. funding needs and their impact on the U.S. Treasury market, the yellow metal may become the ultimate perceived safe haven asset.”
Bank of America has set a price target of $3,000 for gold.
Can gold really replace Treasury bonds?
Of course, not everyone is convinced. While there’s always been a group of investors who prefer gold over Treasuries, their numbers could grow as debt concerns continue to rise.
But even with the U.S. debt now exceeding 120% of GDP, gold’s volatility makes it unlikely to fully replace Treasury bonds in the minds of most investors.
J.P. Morgan is warning investors against overreacting to gold’s perceived potential. The bank’s analysts wrote that:“The most likely scenario for the next few years is the status quo: Deficits remain wide, and debt levels continue to rise.”
Gold’s rally is perplexing many market analysts. For one thing, it is climbing even though consumer sentiment and employment data don’t indicate major fear in the market.
Historically, gold peaks when people feel insecure about the future. That’s not happening right now: A chart from the American Association of Individual Investors shows that sentiment is actually pretty strong, yet gold prices are still climbing.Sentiment among fund managers has jumped to its highest level since June 2020. At the same time, allocations to bonds and cash are dropping, making room for gold to take center stage.
Another oddity in this rally is that gold mining stocks aren’t following the metal’s rise. Schroders reports that the ratio of the gold price to the VanEck Gold Miners ETF is at an extreme level.
Meanwhile, the gold mining industry’s all-in sustaining cost margin is at a record high. This means investors in gold miners don’t believe the current price of $2,700 is sustainable.So, who’s buying all this gold? Central banks have been adding gold to their reserves since 2022, but demand seems to have flattened out this year.
Tip of the Hat to our colleague Vince Lanci for this BofA scoop