Year 2010 had been good to almost all investment classes. Stocks, bonds, commodities, and the dollar are all moving higher in tandem, a first of such unison since 2005. Among them, commodities are leading the pack-- partly on dollar weakness, as well as propped up by world’s central banks quantitative easing.
Base metals, in particular, are further supported as China keeps on trucking with double-digit growth, despite that most of the world practically stood still during the worst global recession since World War II.
If you think Gold's 30% gain last year is impressive, one base metal -- Copper -- outshined the precious metal by rallying 33% on the year, and reached an all-time record in London, New York, and a 3-1/2 year high in Shanghai. Copper futures for March delivery on the Comex in New York stood at $4.4470 a pound at year-end, a record settlement.
Nonetheless, compared to Gold's relatively steady ascent, Copper prices have been on a roller coaster ride in the past few years, dropping almost 54% in 2008 amid global financial crisis, before staging a 130% comeback in 2009, and +33% in 2010 (See Chart Above).
Santa’s Short Cover Rally
China is the world’s single largest buyer of copper. As such, copper prices typically rise and fall on any news coming out of China. However, this time around, particularly in the second half of 2010, markets did not even blink in the face of a Christmas interest rate hike, and other tightening measures already implemented by China.
Before anybody declares Copper 'The Untouchable', I'd like to point out that a look at the CFTC Commitment of Traders report quickly reveals that in November, commercial participants-- who accounted for 54.4% of copper futures open interest-- held net short positions.
This suggests some institutional players probably called
