The Deadline To Turn in Your Gold – May 1st, 1933

While memories of last year’s regional banking crisis might be fading, the industry remains under threat. U.S. regulators just announced the first bank failure of 2024, marking a concerning start to the year.

To make matters worse, a new report from consulting firm, Klaros Group, shows that hundreds of small to mid-sized U.S. banks are currently stressed – facing pressures from commercial real estate loans and rising interest rates. How close are we to a serious crisis?

We’ll also take you back ninety-one years to reflect on Executive Order 6102 — a pivotal, yet highly controversial piece of legislation that continues to impact the public’s trust in government to this very day.

And don’t miss our trivia question this week — it’s a tough one. Let’s dive in!

The Federal Reserve Maintains Current Interest Rates

On Wednesday, the Federal Reserve announced it will maintain the federal funds rate at 5.25% to 5.5%, unchanged since July 2023. Fed Chairman Jerome Powell reiterated the central bank’s strategy to keep rates high to ensure inflation retreats to their 2% target, avoiding premature cuts that could trigger further inflation spikes.

Gold Pulls Back After Reaching Record Highs

After reaching record highs, gold has experienced a slight retreat this week, now trading around $2,300 per ounce. Meanwhile, silver is holding steady at approximately $26.50 per ounce.

Nearly One-Third of U.S. Families ‘One Crisis Away’ from Poverty

Nearly 40 million U.S. families, or 29% of households, are categorized as ALICE (Asset Limited, Income Constrained, Employed), a term created by United Way to describe those earning above the poverty line but insufficient to meet basic needs.

Global Gold Demand Hits Eight-Year High in Q1

Global gold demand has reached its highest first-quarter level in eight years, up to 1,283.3 metric tons — a 3% increase from last year. According to the World Gold Council, the surge is attributed to significant investments in the over-the-counter market, and unprecedented purchases by central banks.

U.S. Regulators Confirm First Bank Failure of 2024

US regulators have closed Republic Bank, marking 2024’s first bank failure. Republic Bank’s 32 branches across New Jersey, Pennsylvania, and New York will resume operations under Fulton Bank. Until then, the FDIC is safeguarding $10 billion, comprising $6 billion in assets and $4 billion in customer deposits.

Regional Banking Crisis: Republic Bank First Bank Failure of 2024

Last week, we briefly discussed a recent report from the Federal Reserve showing 1,804 depository institutions, or 20% of all eligible entities, utilized the Fed’s emergency lending facilities following these failures.

This week, we have a more direct example of the banking sector’s vulnerabilities.

US regulators have announced the closure of Republic Bank, marking the first bank failure of 2024. Republic Bank’s 32 branches across New Jersey, Pennsylvania, and New York will soon resume operations under Fulton Bank, with the FDIC safeguarding $10 billion, including $6 billion in assets and $4 billion in deposits.

Moreover, concerns are mounting due to a new report from the consulting firm Klaros Group, which analyzed approximately 4,000 U.S. banks. The report found that 282 banks, mostly smaller institutions with assets under $10 billion, face significant risks from commercial real estate loans and rising interest rates.

In an interview with CNBC, Brian Graham, co-founder and partner at Klaros Group said:

“Most of these banks aren’t insolvent or even close to insolvent. They’re just stressed… That means there’ll be fewer bank failures. But it doesn’t mean that communities and customers don’t get hurt by that stress.”

As Republic Bank is the first significant failure this year, it could potentially be a precursor to more severe troubles within the banking industry and the broader market. We continue to monitor this developing story closely to keep you informed about potential impacts.

Executive Order 6102 – A Controversial Mandate from the Depths of the Great Depression

Ninety-one years ago, President Franklin D. Roosevelt signed a highly controversial directive — Executive Order 6102, which prohibited the “hoarding of gold coin, gold bullion, and gold certificates within the continental United States.

This drastic measure, enacted on April 5, 1933, and enforced by May 1 of the same year, gave citizens less than 30 days to comply, marking a profound infringement on personal wealth and property rights.

Key facts about Executive Order 6102:

• • Mandatory Exchange: Citizens were required to exchange their gold at federally authorized banks, receiving a fixed rate of $20.67 per ounce, equivalent to the government’s set price at that time.
  • Subsequent Devaluation: Less than a year after the gold was turned in, Roosevelt adjusted the gold price to $35 per ounce as part of the Gold Reserve Act of 1934. This action effectively devalued the dollar by nearly 40%, significantly reducing the purchasing power of the compensation received by former gold owners.
  • Exceptions and Enforcement: Notably, the order included exemptions for items like dental gold, gold coins of recognized special value to collectors, and jewelry. Enforcement was strict, with criminal penalties for non-compliance including a fine of up to $10,000 (about $200,000 today) or up to ten years in prison.

During the early 1930s, the United States and much of the world were gripped by the Great Depression. Bank failures were rampant, fueling fears that further collapses could deplete gold reserves.

Economists believed that hoarding gold hindered economic growth. By seizing the nation’s private gold, the Roosevelt administration aimed to boost the money supply, combat deflation, and spur economic recovery.

The Aftermath: Gold Outlawed for Four Decades

The implications of this executive order were far-reaching, affecting both the national economy and individuals’ trust in the financial system. It wasn’t until 1974, under President Gerald Ford, that Americans could once again freely own and trade gold, beyond jewelry or collector’s coins.

Jewelry quickly evolved as a way for people to keep their money on them safely, draped around their neck or wrist. The tradition of using jewelry as money is evident in modern currencies, like the Thai Baht, which is named after the jewelry that came before it.

The fact that the U.S. government turned to gold in times of great crisis speaks volumes about the metal’s enduring value.

As an investor, think of Executive Order 6102 as a lesson on the importance of holding and protecting your gold assets. Whether you choose to store your gold in a secure vault or safely at home, ensure you have robust protections in place. In uncertain times, adding to your gold portfolio is a safeguard for the future.