NEW YORK ( TheStreet) -- Commodities received a boost higher after the Federal Reserve chose to continue its stimulus program last Wednesday. However, long-term trends could move copper and gold in opposite directions.
The first chart below is of
SPDR Gold Shares
Gold has been in a strong downtrend for much of 2013 due to the perception that the global economy is strengthening. This theme has similarly pushed equity markets to record highs.
Gold usually trades inverse to investor confidence as funds flow into the precious metal during times of duress and uncertainty.
Gold spiked higher last Wednesday as news of the Fed continuing its bond purchases led to selling of the U.S. dollar. Although the dollar has weakened in the months leading up to the Fed meeting and even after the announcement, eventually stimulus will disappear and the dollar will rise relative to other currencies.
The long-term view of the dollar and equity markets is higher, which in effect presents a bearish tone for gold.
The next chart is of
iPath DJ-UBS Copper TR Sub-Idx ETN
Copper is a commodity and industrial metal, thus is negatively affected by the strength of the dollar. More than that, it is a preferred measure of global economic health.
The global recovery means the eventual end to central bank stimulus worldwide, which should lend strength to suppressed currencies.
In spite of this, manufacturing growth and overall increased business activity should create demand for industrial production.
Copper is sure to break out of its multi-year consolidation when developed economies sufficiently regain a footing outside of central bank intervention.
This is where the two roads diverge for copper and gold. Copper has its sights higher on pre-recession levels, while the cyclical bull market in gold may have ended for good in 2011.
At the time of publication the author had no position in any of the stocks mentioned.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.