BMO: Safe-Haven Demand To Drive Gold, Silver Prices Through To 2019By Kitco News
Thursday September 29, 2016 13:04
(Kitco News) - Safe-haven demand will continue to drive gold and silver prices higher next year and support the precious metals market in the next three years, according to one Canadian bank that is making across-the-board revisions to its precious metals forecast.
In a report published Thursday, analysts at BMO Capital Markets, said that they see gold prices averaging $1,413 for 2017, up 5% from their previous forecast $1,350 an ounce.
“We look past the upcoming Fed meeting in December – though it undoubtedly drives short-term volatility – and instead focus on monetary policy that is anything but “normal” for the next year or two at least,” the analysts said. “In our view, low rates are not generating the economic recovery they theoretically should. Certainly, one could argue that accommodative policy is preventing what otherwise would be a slide into recession, but if this is as good as it gets, then safe-haven demand for gold remains supported.”
At the same time the bank revised its outlook for 2018 and 2019, expecting prices to average around $1,350 an ounce and $1,250 an ounce, up 8% and 4% respectively from the previous forecast.
Although 2018 prices are lower compared to 2017, in a telephone interview with Kitco News, precious metals analyst Jessica Fung, said the forecast is to reflect that the “lower for longer interest rate” environment will provide a higher floor for the metals prices going forward.
“The gold rally is far from over and we expect it to continue through 2017 and 2018,” she said.
Along with its more bullish outlook for gold, the bank expects silver prices to average $23.63 an ounce in 2017, up 13% from the previous forecast of $20.88 an ounce. For 2018, the bank sees silver prices averaging 20.25 an ounce, up 7% from the previous estimate. The bank left its 2019 forecast unchanged at $19 an ounce.
The bank analysts also noted that lower interest rates are also driving investors, in a continued search for higher yields, to take more chances in what are becoming over-extended global equity markets. They said this is also positive for gold and silver as they expect to the precious metals will be used as a hedge as these markets unwind.