2010 gold price will be vulnerable to downward correction - S&P

In a recent analysis, S&P says copper demand and supply fundamentals remain favorable when compared to other base metals.

RENO, NV - 

Standard & Poor's has increased its metals price assumption by about 30% this year, citing higher spot and futures prices, "which in most cases have rebounded strongly in recent months."

S&P analysts have also raised their assumptions for 2011 by about 30% and for 2012 by about 20%.

The analysts raised S&P's gold price assumption by 13% from $800 per ounce to $900/oz this year. Gold price assumptions were raised by 23% from $650 to $800 for next year and by 12% from $625 to $700 for 2012.

In a recently published analysis, S&P said, "Investors seeking a hedge against inflation risks and uncertainty in the financial markets continue to support gold prices. According to market figures, however, investment demand exceeded jewelry demand in 2009, and appears to have become a stronger influence on short-term prices."

"We therefore expect prices to remain volatile, and vulnerable to a downward correction," the analysts cautioned.

Copper price assumption for this year was increased 25% from $2 per pound to $2.50/lb. Price assumptions for 2011 increased by 29% from $1.75 to $2.25 and by 21% from $1.65 to $2 for 2012.

"Copper continues to exhibit relatively favorable demand and supply fundamentals compared with other base metals," the analysts said. "This reflects a market that appears to be in broad balance, with declining ore grades and a lack of new near-term projects constraining supply. However, as prices have increased considerably during 2009, there is a risk of a downward correction if economic conditions weaken, in our view."

S&P analysts raised the nickel price assumption by 30% this year from $5/lb to $6.50/lb. Price assumptions for 2011 have been raised by 20% from $5 to $6/lb and by 5% from $5.25 to $5.50 for 2012.

"The current spot price of about $8.50 reflects a strong recovery in recent months, but in our view, prices are volatile and stocks are extremely high," the analysts said, adding "we believe that demand in key end markets, notably stainless steel, will need to improve before the inventory can be consumed and prices can recover sustainably."

The analysts raised S&P's zinc price assumption by 31% for both 2010 and 2011 to 85-cents from 65-cents per pound this year, and by 7% from 70-cents/lb to 75-cents for 2012. "The current spot price of about $1.10 reflects a strong recovery in recent months, but stocks are rising," they advised.

S&P raised its aluminum price assumption for both this year and next by 6% from 80-cents/lb to 85-cents, but have kept it at 85-cents for 2012.

"We continue to regard the demand and supply fundamentals for aluminum to be among the weakest in the base metals complex," the analysts said. "This reflects continued oversupply, despite production cutbacks. Ongoing low capacity utilization rates mean that there is a sizeable amount of spare capacity in the industry, which can be brought back on-stream when prices recover, especially in China.

"Capacity is also growing in the Middle East, for example," they noted. "This spare capacity could, in our view, limit pricing upside. In addition, record inventor levels continue, as production cuts have lagged behind the fall in demand. We believe that key end markets such as transportation and construction need to recover before we see a reduction in inventory and a sustainable recovery in prices."

"We continue to believe that market conditions will improve over time, but this requires better supply discipline, and sustained positive demand trends," they concluded.

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responses to this article

2010 gold price will be vulnerable to downward correction - S More useless analysis from S&P. S&P expects 2009 gold prices to be 20-25% less than they actually were, and 2009 copper prices to be 30-40% than they actually were. This is their base case for 2010-2012 projections. "The analysts raised . .more S&P's gold price assumption by 13% from $800 per ounce to $900/oz this year. Gold price assumptions were raised by 23% from $650 to $800 for next year and by 12% from $625 to $700 for 2012." "Copper price assumption for this year was increased 25% from $2 per pound to $2.50/lb. Price assumptions for 2011 increased by 29% from $1.75 to $2.25 and by 21% from $1.65 to $2 for 2012." . .less by goldie on January 25 2010, 10:50 Find this comment inappropriate? Report it

2010 gold pric More useless analysis from S&P. S&P expects 2009 gold prices to be 20-25% less than they actually were, and 2009 copper prices to be 30-40% than they actually were. This is their base case for 2010-2012 projections. "The analysts raised . .more S&P's gold price assumption by 13% from $800 per ounce to $900/oz this year. Gold price assumptions were raised by 23% from $650 to $800 for next year and by 12% from $625 to $700 for 2012." "Copper price assumption for this year was increased 25% from $2 per pound to $2.50/lb. Price assumptions for 2011 increased by 29% from $1.75 to $2.25 and by 21% from $1.65 to $2 for 2012." . .less by adam on January 25 2010, 10:52 Find this comment inappropriate? Report it

2010 GOLD PRICE This S&P article is pure drivel. Such ravings without so much of a sintilla of WHY the claim is made is, at best, stupid, and at worse, irresponsible. by ddavana on January 25 2010, 12:44 Find this comment inappropriate? Report it

Gold prices Looks to me that this is another attempt to lower gold prices so knowledgeable investors can buy more. And that is exactly what I intend to do when the so-called "correction" takes place. by John Snowden on January 25 2010, 16:10 Find this comment inappropriate? Report it

2010 Gold Price How does the S&P have ANY credibility? I mean ANY, as in a SCINTILLA? They've been consistently bearish and WRONG for 10 YEARS. Snickers the Chimp could throw darts at a board and be more accurate. And remember . .more kids, there is no Gold Cartel. It's all just a coincidence .. really. . .less by rollingeyes on January 25 2010, 18:56 Find this comment inappropriate? Report it

2010 gold price vulnerable (so is everything else) This 'analysis' is much like that of the fraudulent analysis of Kitco's Jon Nadler...no analysis, just fluff so that he can feel good for having gotten out of bed in the morning. by chalzer on January 25 2010, 19:29 Find this comment inappropriate? Report it

Gold S&P has quality research. Gold is headed MUCH lower. by Saga on January 25 2010, 19:48 Find this comment inappropriate? Report it

2010 gold pric more manipulation..... by 3880clay on January 25 2010, 21:56 Find this comment inappropriate? Report it

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