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 (GLD).
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 (JJC). 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. Follow @AndrewSachais This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV