Raymond James lowers metals forecasts for 2020

Raymond James has updated its metal price forecasts for the year due to the COVID-19 pandemic.

Its new full-year forecast for gold in 2020 is US$1,594 per oz., down from its previous forecast of US$1,638 per oz., while its silver price forecast stands at US$16.19 per oz., down from US$19.20 per oz.

The brokerage is maintaining its 2021/2022 gold price forecast at US$1,600 per oz. and forecasts silver will reach US$16.50 per oz. in 2021 (down from an earlier forecast of US$19.00 per oz.) and US$17.50 per oz. in 2022 (down from US$19.00 per ounce).

In the base metals sector, copper is forecast to average US$2.31 per lb. for the year, down from an earlier estimate of US$2.69 per lb., while zinc is down to US88¢ per lb. from US99¢, lead is now US77¢ per lb. down from US89¢ per lb., and nickel has fallen to US$5.39 per lb. from US$5.81 per pound.

Workers spray copper cathode at Barrick Gold and Antofagasta’s Zaldivar copper mine in northern Chile. Credit: Barrick Gold

For 2021, Raymond James forecasts a copper price of US$2.60 per lb.; zinc US95¢; nickel $6.00 per lb.; and lead US87¢ per pound.

Uranium is now forecast to average US$27 per lb. in 2020, down from an earlier estimate of US$30 per lb. and in 2021 US$39 per pound.

In terms of preferred commodities, Raymond James said it prefers precious metals over base and bulk metals because “the macro set up with lower interest rates should benefit the precious metals first and we also expect less of a demand impact for the precious metals (particularly gold).”

“From a company coverage perspective, we prefer companies with higher amounts of operational diversification to protect against specific mine/region closures given the challenge of predicting where COVID-19 could hit,” it stated in a March 30 research note to clients. “Further, in the current uncertain environment, we prefer companies with higher trading liquidity.”

It favours senior gold producers and royalty companies, including Agnico Eagle Mines (TSX: AEM; NYSE: AEM), Franco-Nevada (NYSE: FNV), Barrick Gold (TSX: ABX; NYSE: GOLD), Kinross Gold (NYSE: KGC), Newmont (NYSE: NEM) and Wheaton Precious Metals (NYSE: WPM).

It also likes uranium companies “given uranium prices, while low, have been increasing and there have been some curtailments in an industry with concentrated supply.” It specifically likes Uranium Participation Corp. (TSX: U) and Cameco (TSX: CCO).