By 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.
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.