This metal has been mined for thousands of years. Copper has a very high thermal and electrical conductivity. Pure copper is soft and has a reddish-orange color. Most copper is mined from large, open-pit mines. Chile is the top mine producer of the metal, followed by the U.S. Copper is used in electrical wires, plumbing, roofing, and various industrial uses in machines. In many instances, copper is used in place of aluminum because it is a better electrical conductor. Since it is waterproof, it has been used as roofing material. The green color of copper occurs when it is oxidized over a long period of time.

Well, if people haven’t been paying attention to the U.S. policy on the dollar, it’s no secret that the administration is hoping for a massive decline in the currency to help pump up exports. With the Federal Reserve announcement that they are keeping rates low until late 2014, we all know that this means cheap money will be flooding into commodities as the dollar sinks.

What can you do? Several things are important to note. Yes, the first thing I’m sure you’ve thought of is gold, which I completely agree with. But I would also look to diversify your commodity exposure in other areas like copper. We’ve seen a strong move in copper from the bottom in October, up almost 30%, from approximately $3.00 to the current price of $3.88 per pound. But, with more money flooding the system, we could see last year’s copper highs of just over $4.50 reached and exceeded.

But is copper the right investment for you? Not necessarily, as there are a lot of mining companies that dig for copper and are very reasonably priced. One problem with just buying mining companies in the U.S. is that you are exposed to the dollar when it declines. If commodities go up, so should currencies like the Canadian dollar. A better trade would be to look for copper mining companies listed in Canada. This would give you a two-pronged attack: make money off higher copper prices through higher prices of mining companies and benefit from a higher Canadian dollar against a weaker U.S. dollar.

There are even penny stocks that fit all of these criteria. Amerigo Resources Ltd. (TSX/ARG) is a company that produces copper and molybdenum in Chile. If you thought that penny stocks are only firms that don’t have any real cash, you’re wrong! This copper producer has $0.20 cash per share, for a company whose share price is only $0.88. Since this stock trades in Canadian dollars, the further the U.S. dollar goes down, the more money you make.

Of course, penny stocks are one way to play copper mining companies. The advantage of many penny stocks is that you are getting direct exposure to copper at a low price, while bigger mining companies usually produce a mixture of commodities. Firms like Barrick Gold Corporation (TSX/ABX) produce copper, but a large portion of their production is gold.

The key is, when the central banks are stoking inflation, try to protect your assets by being out of U.S. dollars by investing in commodities and mining companies. These could be solid penny stocks or big, diversified mining companies like Barrick.

Until we see signs that the U.S. administration is changing its course on depressing the dollar and the Federal Reserve reduces monetary policy by raising rates, I would continue looking at the copper mining companies for strength as well as penny stocks in Canada.

Commodities were rock stars in 2010.

Gold has rallied in each of the last 10 years, and it shows a beautiful bullish price chart. But in the first few sessions of the New Year, gold is pausing, as the February Gold fell over $30.00 to back below $1,400 on January 4. I do not feel that it is the beginning of a downward slide, but at the same time I see key resistance around $1,430-$1,440 last encountered in December 2009. Failure to break higher could see gold prices scramble downwards towards $1,300.

A large determinant of how gold will fare is the direction of equities. A strong and bullish stock market tends to pressure gold, as capital flows into equities from gold. This could materialize, but my feeling is that gold will receive support from global uncertainties and increasing demand from China and India, as the countries’ per-capita incomes continue to edge higher.

If the global economies continue to show some signs of softness and the debt crisis in Europe worsens, we could see gold prices move towards $1,500 an ounce by year-end. Also don’t forget about the mounting debt and deficit in the United States.

Of course, this is the best case scenario for $1,500 gold, but it will not be easy.

On the chart, the Relative Strength for gold has fallen below neutral, so there could be additional weakness in the near term. Yet there remains a bullish golden cross on the chart, with the 50-day moving average (MA) of $1,380 above the 200-day MA of $1,265. Look for resistance at $1,400, followed by the four-week high of $1,424.

Silver has also been following gold higher, with the continuous silver futures contract at around $30.00 an ounce. The March silver is just below $30.00. Silver is a play on the economic recovery, as silver is found in electronics.

I also like copper as a play on the recovering global economies, especially in industrial applications and housing.

Another potentially strong commodity is oil. Continued global economic renewal could drive prices towards $100.00 this year.

The near-term technical picture for the February oil is moderately bullish, but on weakening Relative Strength. Oil had broken above $90.00, but has since fallen back below. I do not sense a downward return to its previous $70.00-$80.00 channel, unless the global economies slow.

Oil is trading above both its 50-day MA of $87.06 and 200-day MA of $83.22 and is showing a bullish golden cross on the chart. A move towards $100.00 is possible.

My advice to play the commodities is to buy the gold/silver and oil stocks on weakness.

You would have to be living in a cave not to notice the bull market in commodities. As with any bull market, the logical question is whether it is sustainable or not and, if it is sustainable, what is its lifespan? Some of the top economists in North America are comparing the latest market stampede into commodities with people lost in a desert seeing a mirage and are warning of a rude awakening in the coming months. So, which is it: a sustainable secular bull market or a mirage of precious water in the desert for thirsty men?

Well, raw numbers, without a doubt, shout “bull,” loud and clear. Investor gains are keeping them returning for more. Spot gold, for example, touched, albeit briefly, an all-time high of $1,420.90 per ounce last week before dropping back under its new resistance level of $1,400. At the same time, copper is attacking its record high as well, while silver has hit a 30-year high before retreating about three percent on the same day. As for oil, it is hovering around its two-year high, spot trading within a narrow range between $86.00 and $88.00 per barrel.

At face value, commodities, it seems, are soaring, and commodity-based economies, like those of Australia and Canada, are prospering. Sure, the world would be a better place if there were not a “but” coming up every time something good is happening, but (pun intended), there is one. What those fearful of the commodity bull are saying is not that commodity fundamentals are inherently stronger than those of other asset classes, but that their resurgence has more to do with the U.S. monetary policy than with factors such as supply and demand imbalances.

QE2 is what has everyone’s knickers in a knot as of late. The U.S. Federal Reserve is widely expected to unleash another round of quantitative easing (read, “buy more treasuries and print more money into the financial systems”), the purpose of which is to drive the greenback into the ground to make the U.S. exports more attractive in the international markets. In addition to the fact that, globally, commodities are priced in the U.S. dollar, there is also the perception that the financial market risk has eased somewhat. As a result, some economists are attributing these two factors as the main drivers of higher commodity prices at the moment, but are doubtful this will provide enough fuel for the current commodity rallies to continue for much longer.

This is fine reasoning, I agree. But it is also such a small part of the bigger picture that does not fundamentally skew the short- and medium-term prospects for commodities. What is omitted from this reasoning is the potential impact that excess money supply may end up creating—higher price levels or inflation. Additionally, the global economy is not recovering either as quickly as anticipated or as radically as many had hoped it would. The global economic output for 2011 is expected to be a very modest four percent, while in North America an utmost unimpressive 2.5%. As for Europe, let’s just say if they pull off 1.5%, they’ll be lucky.

The way I see it, the stampede into commodities is investors’ response to all this volatility and economic uncertainty. Investors no longer trust policy decisions. They cannot rely on the G-20 to find solutions that will benefit the greater good of the planet, not just their respective regions. They fear the decoupling of Wall Street from the rest of the economy, as well as newly coined terms like “currency wars,” or “haves and have not economies.” Nothing seems solid and reliable anymore. So, when they buy gold, they see something tangible in their hands, the value of which is not likely to evaporate like the value of paper money.

Those are the layers that are impacting commodity prices as of late and I don’t see them go away anytime soon. In my view, the mirage here is not soaring commodity prices; rather, the mirage is the global economic recovery. And as long as there is a need to seek safety in these tumultuous times, commodity prices will keep soaring.