S&P raises short-term price outlook for gold, copper, zinc
Higher spot prices and future prices have prompted S&P to raise its short-term price outlook for gold, copper, aluminum and zinc. However, S&P is still pessimistic about nickel prices.
Author: Dorothy Kosich
Posted: Monday , 05 Oct 2009
RENO, NV -
mineweb.com
Rising market confidence has prompted Standard & Poor's to revise its short-term metals pricing assumptions for gold, aluminum, copper and zinc.
S&P Credit Analyst Alex Herbert said the change "reflects the higher spot prices of recent months, and also higher futures prices, which are indicative of growing market confidence in economic recovery after the severe downturn in the global economy and financial sector."
Herbert and fellow Credit Analyst Donald Marleau and Corporate Criteria Officer Emmanuel DuBois-Pelerin left price assumptions for 2011, 2012, and the longer term unchanged.
S&P raised its gold price assumption for 2010 from $750 per ounce to $800/oz. Other price assumptions remain unchanged. "Investors seeking a hedge against inflation risks and uncertainty in the financial markets continue to support gold prices," the analysts said. "The metal's properties as a safe haven, and to a lesser extent the demand for jewelry, also support its longer-term price prospects."
The analysts raised the copper price for 2010 from $1.75 to $2 a pound. "Copper continues to exhibit relatively better demand and supply fundamentals compared with other base metals, in our opinion. This reflects a market which appears to be in broad balance, with declining ore grades and a lack of new near-term projects constraining supply. Furthermore, inventory levels have declined and are now low, in our view."
"However, as prices have increased considerably during 2009, there is a risk of a downward correction if economic conditions weaken, in our view," they advised.
S&P also raised its zinc price assumption for next year from 60-cents per pound to 65-cents. "In our view, the market appears to be in broad balance and inventories appear moderate."
The aluminum price assumption was raised from 75-cents per pound to 80-cents per pound for 2010 by the analysts. Nevertheless, the analysts said, "We continue to regard the demand and supply fundamentals for aluminum to be among the weakest in the base metals complex."
Aluminum's weakness reflects a number of factors including improving global demand that will take at least another couple of years to recover, they said. "Second, despite production cutbacks, there is continued oversupply," they added.
"A third factor is record inventory levels, which have grown as production cuts have lagged behind the fall in demand," the analysts suggested. "We continue to believe that market conditions will improve over time, but that this requires better supply discipline, and sustained positive demand trends."
"In our view, the higher prices of most metals could be at risk if these expectations of future economic recovery were bit realized, particularly in the case of copper and nickel," they advised. "Furthermore, potentially weak supply discipline exposes prices in some segments-notably aluminum and nickel, which also suffer from high inventories."
"Despite the evidence of higher prices, average prices of the base metals in this review for the year to Sept. 30, 2009, remain substantially lower than in the prior year," they noted. |
