Commodities have seen spectacular gains and copper prices, along with its related exchange traded fund (ETF) is still pushing higher. Still, copper is just as likely to dip down again as it is to jump higher in the new year.

Copper has hit a new 16-month high, and the metal is on course for the biggest annual gain – almost 140% – in more than two decades, comments Dian L. Chu for The Trading Report. The dollar rebound had little effect on copper as speculative buying and confidence has kept copper prices up. [Copper ETF soars as dollar bulls emerge.]

Copper is seen as a bellwether for the global economy. The metal is used in housing, power generation and other cyclical sectors. [Copper ETF spotlight.]

Many copper observers are confounded by copper’s rise in face of swelling inventories and signs of weak consumption. There are even some that are commenting on copper’s behavior, which is seen these days as being similar to that of gold. Still, factors like the anticipated global recovery, new investment cash, index/fund buying, weak U.S. dollar and labor disruptions have all helped push aside concerns over large copper inventories.

China’s ambitious infrastructure-focused stimulus package and strategic stockpiling has been a major influence on copper prices in the last year. India is on route for growth next year and copper demand there is expected to jump 6% next year. With countries like China and India buying up copper, it could soon become a strategic asset and inflation hedge in the future. Observers worry that China’s imports of refined copper may not reflect demand for at least six more months and that China may even start re-exporting this year. [China’s impact on copper.]

Technical signals for copper are bullish, remarks Chu, and the next resistance level looks like it could be around $7,500 to $7,600, with a potential correction toward $6,500 and $5,800. The pessimistic outlook would put copper prices down to $5,000 to $6,000 in 2010 if the global recovery doesn’t gain traction. Copper’s all-time high was $8,940, reached in July 2008. [ETFs to play the base metals boom.]

For more information on copper, visit our copper category.

  • iPath Dow Jones Copper Index (NYSEArca: JJC): up 9.5% in the last month

  • PowerShares DB Base Metals (DBB): up 11% in the last month; holds futures contracts for aluminum, copper and zinc

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.