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At a point in time when the driving gold prices have hogged the limelight, there has been much more movement in the precious metal segment with copper prices to their highest levels in more than two years on Wednesday, buoyed by dollar weakness and expectations of stimulus measures in the United States.

Not only did LME copper hit a new 27-month peak but what’s driving the focus is the fact that copper has been up 14% in the past 6 weeks alone after it fell 25% from its 2009 rally on fears of a double-dip recession. Such has been the surge of copper that the market even shrugged off a fall in imports of copper to China in September, which is the world's largest consumer of the metal. The positive rally is not just limited to copper as tin also hit a record high, and battery material lead hit its highest since January this year.

Dollar Weakness and Metal Rally

The broad weakness in the dollar against other major currencies after the release of the minutes of the US Federal Reserve's last policy meeting helped whet investor appetite for dollar-denominated commodities, which become cheaper for non-US investors as the greenback declines. The movement in the dollar index however has a lot of effect on commodities and other currencies, even if it does not replicate the action of the index but the USD needs some sort of a trigger mechanism to come out of its negative sluggish cycle.

At the LME

Lead traded at $2,438 PMT versus $,2375 PMT at Tuesday's close. It earlier hits its highest level since January at $2,434 PMT. Aluminium traded at $2,441 PMT from Tuesday's close of $2,437 PMT, having earlier hit its highest level since April at $2,447 PMT. Zinc traded at $2,412 from Tuesday's close of $2,370, also having hit its highest level since April, when it touched $2,419 PMT. Nickel was at $24,350 PMT versus Tues-day's close of $24,050 PMT.

Base Metals Projections

World Market Pulse analysts believe that new investor interest in products such as commodities exchange-traded funds will also boost base metals demand and prices from 2010 until 2015. Analysts at consultancy CRU Group are also bullish as evident from its 2014 against 2010 commodity price performance forecast thermometer, CRU sees gains of 15 percent or more for copper and tin. During this same period, the group also sees 0-15 percent gains for lead, zinc and aluminium, and 0-10 percent for nickel.

Metal ETFs Worth Considering in the Current Metal Rally

1: PowerShares DB Base Metals Fund (NYSEARCA:DBB): The Index is a rules-based index composed of futures contracts on some of the most liquid and widely used base metals - aluminum, zinc and copper (grade A). The index is intended to reflect the performance of the industrial metals sector.

Expense Ratio: 0.75%

2: iPath DJ-UBS Copper Total Return Sub-IndexSM ETN (NYSEARCA:JJC): The index includes the contract in the Dow Jones-UBS Commodity Index Total Return that relates to a single commodity, copper (currently the Copper High Grade futures contract traded on the COMEX).

Expense Ratio: 0.75%

3: iPath DJ-UBS Industrial Metals Total Return Sub-Index ETN (NYSEARCA:JJM): The Index is currently composed of four futures contracts on industrial metals, three of which (aluminum, nickel and zinc) are traded on the London Metal Exchange and the other of which (copper) is traded on the COMEX division of the New York Mercantile Exchange.

Expense Ratio: 0.75%

4: ELEMENTS Rogers Intl Commodity Metal ETN (NYSEARCA:RJZ): The Index represents the value of a basket of 10 metals commodity futures contracts and is a sub-index of the Rogers International Commodity Index.

Expense Ratio: 0.75%

5: iPath DJ-UBS Nickel Total Return Sub-IndexSM ETN (NYSEARCA:JJN): The index includes the contract in the Dow Jones-UBS Commodity Index Total Return that relates to a single commodity.

Expense Ratio: 0.75%

6: iPath Dow Jones-UBS Aluminum Total Return Sub-IndexSM ETN (NYSEARCA:JJU): The Dow Jones-UBS Aluminum Subindex Total Return is a single-commodity sub-index currently consisting of one futures contract on the commodity of aluminum.

Expense Ratio: 0.75%

7: E-TRACS UBS Bloomberg CMCI Ind Metal ETN (NYSEARCA:UBM): The CMCI Industrial Metals TR measures the collateralized returns from a basket of five futures contracts representing the industrial metals sector. The commodity futures contracts are diversified across five constant maturities from three months up to three years.

Expense Ratio: 0.65%

Disclosure: No positions

Source: ETFs to Play the Declining Dollar's Impact on Base Metals