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Market Nuggets: TDS: Rise In Speculative Shorts In

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Many speculators are building short positions in metals, which could mean increased volatility ahead, says TD Securities. These accounts are net short in copper. While they remain net long in platinum group metals, the number of gross shorts has hit historical highs. Shorts are also building in gold and silver. “This pressure from short specs is like pushing a spring down tighter and tighter,” TDS says. Analysts say “either the table is going to give way, just as the floor could fall out in Europe, with prices crashing lower,” or else shorts will be forced out of their positions on massive short covering if prices recover. “Either way, we could be set to witness massive volatility in the markets at the behest of the next big macro event fallout—this makes buying options an option now,” TDS says. The TDS view is Europe won’t melt down, European Central Bank backstops are coming and stimulus can be expected from China and the U.S. “Therefore, a move higher could come swiftly once it does, but in the meantime we still expect prices to continue to be pressured lower under the weight of the speculative pessimism in the short run.”