Federal Reserve Announces Tiny Rate Hike, Spooked by War Impact

Dysfunctional U.S. Mint Runs Out of Silver Blanks Again, Halting Sales of Some Items

Mike Gleason Mike Gleason
Interview with: Mike Gleason
March 18th, 2022 Comments

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Precious metals markets sold off ahead of this week’s Federal Reserve policy meeting. But after Fed officials announced their rate hike, prices recovered somewhat.

As of this Friday recording, the gold market is putting in a weekly decline of 2.8% to bring spot prices to $1,941 an ounce.

Silver shows a 3.1% loss on the week to come in at $25.32 an ounce.

Platinum is dipping by 4.5% to trade at $1,058.

And finally, the palladium market is registering a 9.5% loss this week at $2,589 per ounce. Palladium prices have swung by $1,000 over the past two weeks from high point to low point – a measure of just how much fear and uncertainty there is about supply amid the global economic blockade of Russia.

Another market that has gone haywire is nickel. It’s not a metal that typically drives headlines, but prices swung so violently in futures markets that trading had to be halted for the first time in 24 years.

Nickel prices doubled in matter of hours last week. An institutional trader had placed big bets that nickel prices would fall and was forced to cover, or buy back, his short positions. An epic short squeeze ensued, followed by a massive sell-off this week.

Some precious metals analysts point to the potential for a similar short squeeze to play out in silver. The paper silver market is heavily shorted by leveraged institutional traders who have no intention or desire to deliver physical metal. In the event of a scramble for scarce supplies of silver, futures markets could become completely unhinged.

In other news, the big question on investors’ minds is how the Federal Reserve’s newly launched rate hiking campaign will impact markets.

On Wednesday, the Fed bumped up its benchmark interest rate by a quarter point, as expected. Both equity and precious metals markets responded positively.

Investors were relieved that central bankers didn’t opt for a larger hike. However, Jerome Powell and company promised additional hikes this year.

Powell acknowledged that monetary policy has failed to keep inflation contained within target ranges. He admitted that policymakers got it wrong in forecasting only modest price level increases. Yet he expressed confidence in the Fed’s current forecasts for inflation rates to fall.

PBS News Hour Report: The chair of the Federal Reserve, J. Powell acknowledged today that he and the wider Federal Reserve Board had underestimated the threat of inflation last year. But with the annual inflation rate now closing in on 8%, that attitude has changed and Powell committed to ramping up a fight against ever rising prices.

Jerome Powell: We understand that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing and transportation. The median inflation projection of FOMC participants is 4.3% this year and falls to 2.7% next year and 2.3% in 2024. This trajectory is notably higher than projected in December and participants continue to see risks as weighted to the upside.

Powell’s outlook for inflation rates to come down but remain elevated above the Fed’s 2% target was widely interpreted as hawkish. The implication is that the Fed will find reason to keep tightening into next year.

Others interpret the Fed’s inflation outlook as an admission that central bankers won’t have the will to bring inflation back below target.

They may hike rates a few times. They may try to curtail bond purchases. But they won’t take away the punch bowl completely.

And the moment the banking system, stock market, or bond market run into a crisis, the Fed will reverse course on tightening.

The recent spikes in energy and food prices threaten to bring about another kind of crisis. Although commodity prices fell sharply earlier this week, the risk of worsening supply chain disruptions and shortages still looms.

Precious metals markets certainly face scarcity issues. Relentlessly strong demand for physical bullion is straining mints and pressuring premiums higher.

The U.S. Mint announced this week that shortages of silver blanks for striking coins will force the cancellation of some planned products. The Mint will no longer be producing replica Morgan and Peace Silver Dollars for 2022 – a big disappointment for fans of these historic coins. Minted from 1878 to 1935, these one-dollar silver coins now command significant semi-numismatic premiums in the collectible market based on their condition.

Silver half-dollars, quarters, and dimes minted up until 1964 carry lower premiums over spot – though recently premiums for these no longer minted coins have risen due to strong buying pressure.

Those who prefer the iconic Morgan silver dollar design and a full-ounce unit size may want to take a look at privately minted Morgan Silver Rounds.

The name Morgan refers to George T Morgan, who served as a U.S. Mint engraver during the late 1870s.

Morgan made the bold decision to move away from Greek style figures and use an American woman to symbolize liberty. A friend recommended Anna Willess Williams from Philadelphia as the model. He declared her profile to be the most perfect he had seen.

Today’s Morgan silver rounds are an homage to the classic design of the historic one-dollar silver coins. The rounds are composed of 99.9% pure silver and are available through Money Metals Exchange at a significant discount compared to Silver Eagles especially and other government-minted coins.

On the sound money policy front, we’re pleased to report some positive results in Virginia, with an expansion of the precious metals sales tax exemption heading to the governor’s desk.

Meanwhile, the Mississippi senate ultimately failed to pass the new sales tax exemption there, but similar efforts in Kentucky, Hawaii, Tennessee, and New Jersey are still moving forward.

I want to thank our Money Metals customers in all the states I just mentioned, along with our customers in other states where we also have active legislative projects.

Thousands of customers have been responding to our emails and letters asking for them to contact their state legislators. We are absolutely certain that the politicians are hearing from tons of precious metals investors -- and this grassroots pressure is absolutely having an impact.

Well, that will do it for this week. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. Until then this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.

Mike Gleason

About the Author:

Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.