Gold’s net longs were also seen heading for the exit doors of futures and options as they resumed the reduction of their positions and as the speculative shorts piled on more bets on their side. In fact, the gain in net short positioning now runs above last year’s average of approximately 91 tonnes and it appears to indicate additional vulnerability in gold. Such increased wariness was also manifest in the positioning makeup of the platinum and palladium markets.
The palladium market’s net speculative length shrank by over 200K ounces last week in the wake of a 100K+ addition to short positions and an unwinding of long ones to the tune of 96K ounces. The development might portend price declines in that noble metal. Perhaps some of the caution manifest in these shifts came on the heels of some European carmakers expressing doubts about Europe’s overall ability to keep buying lots of cars in 2012 if the debt crisis persists or if it knocks the region into an economic contraction. Much depends on the Old World’s leadership and banking sector at this juncture, but local would-be car buyers are still short of exhibiting a lot of confidence. “Subprime” confidence levels make for subpar car (and home sales) –that’s a phenomenon that’s been on display in the US for a while now.
Another banking sector-that of China- is taking on the unpleasant, “subprime” flavored taste that sparked the whole mess the global financial and economic sectors are still embroiled in at the moment. A huge pool ($1.7 trillion) of loans to local government investment vehicles that could turn into “IEDs” (Incendiary Economic Devices) at any time has many a Chinese lender up at night these days. A virtual explosion of all sorts of unregulated lending has been noted in that country, and the activity is outside of the banking system. Let’s just call it micro-financing with a macro-potential for deep trouble.
Until tomorrow, do try to keep out of (financial) trouble.
Jon Nadler is a Senior Metals Analyst at Kitco Metals Inc. North America