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Copper Falls on Outlook for Lower House Prices in China

August 5, 2010 at 18:58 by Vladimir Vyun

Copper dropped today from its record prices on speculation that demand for the metal would wane as house prices in China will tumble. Chinese government was concerned after house prices jumped 68 percent in the first quarter that soaring prices would create bubble that sooner or later burst, crippling the nation’s economy. The government was already attempting to cool the overheated economy and bring prices down. Now Chinese banking regulators are going to perform stress tests on banks to discover how they would fare in case of a 60% slump of Chinese house prices. Housing market has great influence on copper prices as construction makes up a quarter of copper demand.

Frank McGhee, the head dealer at Integrated Brokerage Services LLC, thinks that “if China wants to signal a slowdown, then the copper rally may have run its course”. Another analyst said that that it’ll be good if annual growth of Chinese demand would be limited by 8 percent.

September futures for copper delivery slid $0.0480 (1.4 percent) to $3.3565 per pound by 11:21 on COMEX. Yesterday, price reached $3.4105, the highest level since April 29th. Delivery for copper in three months dropped $94.50 (1.3 percent) to $7,410.50 per metric ton on LME.

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