From the December 01, 2010 issue of Futures Magazine • Subscribe!

Copper shines

Like many commodities, copper saw a steep decline in mid-2008 as the financial crisis was in full-swing. Two-years later, copper is nearing the pre-crisis highs that were seen in May 2008.

Darin Newsom, senior analyst at Telvent DTN, says economic growth coming from China has been the catalyst for the recent explosive moves. “The great thing about copper is that it’s an indicator for the global economic situation. A strong demand for copper is indicative of growing demand overall, especially Chinese demand,” he says. Going forward, Newsom says the market is really in control of its own destiny as much depends on how the market reacts as it nears the May 2008 high of $4.27 per lb. “If the market doesn’t even blink, it will bring a lot of investment money in. If it starts to falter and fall back, you might see some pressure and come back,” Newsom says. In the long-run, he is bullish and says if the March contract can get through the $4.27 level, it could go to $4.50. If not, he sees support at $3.65.

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Rob Kurzatkowski, senior commodity analyst at optionsXpress, is also bullish. In addition to Chinese strength, he says investors looking to increase commodity exposure has also helped copper. “Traders have been split on where to invest. The one area they don’t want to invest is in currencies. They don’t want their money tied up in a depreciating asset,” says Kurzatkowski. “The dollar has fallen against the euro and other currencies, but those other currencies have also dropped in relation to commodity currencies.”

He sees a realistic upside target of $4.24 through December on the March contract, but says $4.50 is obtainable. On the downside, he sees support at $3.90 and if that is taken out at $3.75.

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