Global economic challenges which include the imbalance of supply and the continued strength of the U.S. economy had devastating effects on the commodities market according to PwC’s Gold, Silver and Copper Price Report.
The report notes reveal that the low prices resulted to widespread cuts across the sector from exploration to production while at the same time operating capital expenses. However, the present slump in prices is indicative of the cyclical nature of the industry.
Gold companies while in the long term view is above current sport prices, volatility still remains the primary issue. For base metal producers, an expanding global population that will have greater overall need for products such as automobiles, computers and household goods boosted the current prices.
Due to the low commodities price environment, miners had to cut cost in order to survive and must continue to use responsible cost management approaches and some investment production.
Gold is trading at multi-year lows under $1,200 per ounce. The decline was due by the strength of the U.S. economy coupled with the expectations of higher interest rates. While the long term price of gold for planning purposes is down in 2014 as compared to a year ago (currently at $1,284 per ounce on average). Mining companies have been narrowed in their range of view of the long term price albeit the pricing used for reserve pricing has remained relatively consistent every year.
Cost cutting has been the trend with all-in sustaining costs being the primary key metric companies have been reportedly using to account the cost. The issue is that a lot of mines are now operating at cost levels slightly above spot prices.
Silver has been the hardest hit precious metal in the past three years which fell by more than half to below $16 per ounce this week. This significantly reduced the costs for silver companies to survive the current price disturbance as companies focus on what they can control instead on a volatile market price.
Copper is basically used in everything from automobiles to electric transmission and will forever be needed to make commodities that consumers of this day and age demand. Although the metal is now being traded at around $3 per pound, it was down from its record of $4.60 in the past four years, the price has since bounced around as much as other commodities.
The long-term price for copper was found to be at $3.11 on average with a narrow band of prices that many companies are using for their plans by reserving $3.00 to $3.25 for majority of companies. Because of its widespread usefulness, the price of copper is still considered high enough for many well-disciplined producers to gain profitable income.