RENO, NV – Standard & Poor’s Thursday raised its gold price assumption from $1,100 per ounce to $1,200 per ounce for the remainder of this year.
The price assumption for 2012 was raised from $1,000 to $1,100 per ounce, while the price assumption for 2013 and beyond is now $900 per ounce, versus $900 for 2012, $700 for 2014, and $600 for 2015 previously.
In their analysis, S&P Credit Analysts Andrey Nikolaev and Mark Puccia expressed concern that currently “about half of the demand for gold comes from financial investors. The key risk remains a sharp decrease in investor demand as the uncertainty in the global economy declines.”
“The long-term price assumption therefore remains conservative at $900 per ounce, the analysts advised. “Long-term pricing may be supported by the growing costs of producers such as those in South Africa.”
S&P replaced its metal price assumptions for 2013, 2014, and 2015 and beyond, citing the “increased volatility of the markets. Our long-term price assumptions for 2013 and beyond reflect a somewhat conservative base case that focuses on metal price fundamentals, such as cash cost levels for marginal producers.”
The credit rating agency’s copper price assumptions were raised from $3 per pound this year to $3.25 per pound, while the 2012 assumption was raised from $2.75 per pound to $3 per pound.
The copper price assumption for 2013 and beyond is now $2.25 per pound compared to previous assumptions of $2.5 for 2013, $2 for 2014, and $1.5 for 1015.
“Despite the weakening in price, copper continues to exhibit growth in demand and more constrained supply relative to those of other base metals,” the analysts said. “Declining ore grades and lack of new near-term projects are constraining supply, leading to a slight fall in inventories through 2010.”
“However, prices remain volatile and the forward curve for copper slopes downward,” they added.
Nickel price assumptions are being raised from $7.50 per pound this year to $8.50 per pound. The price for 2012 has been increased from $7 per pound to $8 per pound. Forecast nickel prices for 2013 and beyond were raised from $5.50 per pound to $6.75 per pound.
“Prices have weakened in the last couple of months but remain substantially above our previous pricing assumptions. Inventories continue to decline,” said the analysts.
“Prices are likely to remain volatile given expectations for several new projects, including Barro Alto, coming on stream. Long-term pricing should be supported by declining grades, which will raise costs for many producers.”
S&P analysts also raised zinc prices assumptions to 80-cents per pound for 2011 and 2012. The assumptions for 2013 and beyond remain unchanged at 75-cents per pound.
“Despite recent weakening, zinc prices remain substantially above our previous pricing assumptions,” said S&P. “We have maintained our pricing assumption for 2013 and beyond because in the longer term the risk of price correction remains, given that the stocks of this commodity are rising, which may suggest oversupply.”