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BHP continues its plunge

After hitting a six-month low of 4,656.1 index points yesterday, the S&P/ASX 200 (^AXJO) (ASX: XJO) is today trading slightly higher, although the miners are again in the red.

Whilst iron ore topped the US$120 per tonne mark last week (after sitting at around US$110 the week before), analysts predicted that the price would not be sustainable and that it would still likely fall under US$100 in the third quarter. Their predictions are beginning to look more and more likely, as the resource has dropped by around 3% in the last two trading days.

Growing concerns regarding China’s credit crunch and the Federal Reserve’s decision to taper off its bond-buying program are also impacting our miners. Today, BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO) are trading a further 1.5% and 1.2% down to add to their losses yesterday. Meanwhile, after losing 13.1% in the last 3 trading sessions due to a productions downgrade, shareholders in Fortescue Metals (ASX: FMG) are perhaps feeling slight relief today with their shares up 1.5%.

These are short-term movements, of course, but they point to the lack of clarity in the long-term picture.

Foolish Takeaway:

Although BHP (with its more diversified projects) isn’t as exposed to the volatility in the iron ore market as Rio Tinto or Fortescue, the mining sectormay not be the best place to invest your money. Until the market offers these companies at much more attractive prices, they likely aren’t the best options for your portfolio.

Instead, The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

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Motley Fool contributor Ryan Newman does not own any of the companies mentioned in this article.

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