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  • China’s Hand in Copper’s Collapse

    Dr. Copper is sick and China’s economy isn’t doing anything to better the situation.

    Copper prices haven’t fared well since the end of last week. The red metal took its first hit on Friday, and by Wednesday, three-month copper on the London Metal Exchange had declined to its lowest level since July 2010, changing hands at $5,376.25 per tonne. According to The Wall Street Journal, the metal has given up 13 percent of its price year to date, shedding the bulk of that amount over the course of the last week.
    Copper has long been considered the bellwether of the economy, a characteristic that earned it the nickname Dr. Copper. However, of late it seems that the red metal has found itself entangled in China’s financial system and is now feeling the pressure as the Asian country’s fragile economy continues to be tested.

    In China, copper acts as collateral for loans, and that has sparked a mass sell off of the red metal as the Chinese government cracks down on the country’s shady financial sector.
    The Sydney Morning Herald states.
    Concerns over copper prices have left investors a bit worried. The metal was hit particularly hard after a small solar panel company, Chaori Solar, became the first company to default on a bond payment. Despite the company’s small size, investors took that as a signal that the Chinese government will be altering its ways, no longer bailing out companies.
    John Hardy, head of foreign-exchange strategy at Saxo Bank
    On a slightly more positive note, Barclays (LSE:BARC

    Thursday March 13, 2014, 4:30am PDT
    By Vivien Diniz - Exclusive to Copper Investing News