Gold officially entered a bull market in last week’s trading with prices gaining more than 20% from their December lows. The silver price also put on some very nice gains, but the price needs to reach about $16.40 before watchers can make the same claim.

If the white metal can exceed last week’s gains of more than 5%, the silver market will reach official bull territory too.

Metals investors will be following the speculation surrounding the upcoming Federal Open Market Committee (FOMC) meeting on March 16th. Recent rallies in stocks, commodities, and oil are raising the odds that officials just might hike rates once again. Their problem is that the rally we’re seeing is largely based upon speculation they would not further tighten.

The FOMC hiked rates in December. The ensuing carnage in the markets during the second half of December and January led to a consensus that officials would abandon attempts at further increases. Some even speculated that officials would completely reverse course and may even implement negative rates. At which point the rally began.

Markets are behaving like the stimulus addicts they have become. The Fed is caught in a trap of its own making. Officials may want to raise rates, but recent experience has shown they won’t be able to pull that off without immediate and profound consequences.

Cracks Widen in Paper Gold Market

Gold investors witnessed a “first” in the markets last week. Constraints emerged in the previously limitless supply of paper gold. Blackrock announced that it was suspending issuance of new shares in the iShare’s Gold Trust (IAU).

The Blackrock press release describes the suspension as temporary. The fund has to make a filing with the SEC before they can resume issuing new shares. Demand for gold since the start of the year apparently caught them flat footed. From the Blackrock press release:

Since the start of 2016, in response to global macroeconomic conditions, demand for gold and for IAU has surged among global investors. IAU has $8 billion in assets under management, and has expanded $1.4 billion year to date. February marked its largest creation activity in the last decade.