Copper (COMEX:HGJ14) has been under heavy pressure lately, and is now down more than 10% YTD.
Copper supply is expected to outpace demand over the next few years, but the more recent turbulence is related to China – the world’s largest consumer. The Shanghai Property index has struggled over concerns that the government will restrict credit to the sector, and there are fears of weak Chinese growth after trade data revealed an 18.1% Y/Y decline in exports vs. an expected gain of 7.5%.
The other ongoing story from China so far in 2014 has been debt market struggles which came to a head last Friday when the country saw its first ever corporate default. Some analysts say the default is a positive step, an example of the government allowing free-market forces to weed out the weak links, while others say it is a sign of things to come. Either way, it’s a positive development for the gold market, especially because these debt-issues are occurring in the world’s largest consumer of the yellow metal.