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Why Did Copper Weaken on June 14?

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Copper declined on Tuesday

Copper fell on Tuesday, June 14, 2016, amid the stronger dollar and economic instability. In addition to these factors, the surge in London Metal Exchange (or LME) copper inventories and concerns over the Brexit vote have been weighing on copper prices this week.

At 1:23 PM EDT on Tuesday, the COMEX copper contract for July delivery was trading at ~$2.04 per pound, a drop of 0.51%.

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Increase in COMEX copper short positions

According to the Commitments of Traders report released by the CFTC (Commodity Futures Trading Commission) on Friday, June 10, 2016, short positions by money managers on COMEX copper surged to 70,628. This was up from the previous report’s number of 62,995.

This increase is mainly due to the recent surge in the copper inventories in the LME warehouses. In the last week, the copper stocks in LME jumped more than 37% and kept the pressure on prices. The shift of huge volumes of copper stocks from Shanghai warehouses to LME warehouses dented the sentiment around copper and resulted in the decline of prices.

Stronger dollar and Brexit vote concerns

The stronger dollar also kept the pressure on copper prices on Thursday. China is the largest copper consumer in the world, which accounts for more than 45% of the world’s demand. China’s economic situation is expected to drive the demand for copper.

The recently released Chinese economic data failed to ensure strong demand from the world’s largest copper consumer. The global uncertainty raised by the Brexit vote concerns is also affecting copper prices this week.

At 1:43 PM EDT, major producers Freeport-McMoRan (FCX), Glencore (GLNCY), BHP Billiton (BHP), and Rio Tinto (RIO) fell by ~3.1%, ~3.5%, ~2.7%, and 3.1%. The base metal–related SPDR S&P Metals & Mining ETF (XME) fell by ~2.2%.

The next article explores the performance of gold and silver on June 14.

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