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BMO sees gold prices averaging Q4 at $1,575 sees more upside in 2020

Kitco News

(Kitco News) - Although the gold market has hit a stumbling block with prices hovering around $1,500 one Canadian bank remains optimistic that prices will ultimately head higher.

In a report Wednesday, Bank Of Montreal (BMO) increased its forecast for gold and silver through 2022. This is the second time the bank has raised its price forecast this summer.

Colin Hamilton, precious metals analyst at the bank said that the firm is bullish on gold as central banks are “falling over each other to ease,” monetary policy.

“In our view, this should provide support for gold and silver to trade for a sustained period above our long-run equilibrium expectations,” he said.

In its revised forecast BMO analysts see gold prices pushing to $1,600 to average the fourth quarter around $1,575. Looking ahead, for 2020, the bank sees gold prices average next year at $1,506, an increase of more than 13% from its previous forecast.

For silver, BMO sees prices breaching $20 an ounce to average the fourth quarter around $19.90 an ounce. Next year the bank sees the precious metal averaging 2020 around $18.60 an ounce, up nearly 21% from the previous forecast.

“The current economic climate is certainly providing a boon for gold. Hamilton said in his report. “In uncertain times, where global trade is stalling, politics is becoming more fractured and geopolitical risks are rising, the world’s investment managers are turning to gold.”

The comments come after gold price have fallen sharply from last month’s six-year. The precious metal is now struggling to hold critical resistance at $1,500 an ounce. December gold futures last traded at $1,501.30 an ounce, up 0.15% on the day.

Silver prices have fallen sharply from last month’s two-year highs and are now trading around support above $18 an ounce. December silver futures last traded at $18.125 an ounce, down 0.34% on the day.

While lower interest rates, geopolitical uncertainty, the ongoing global trade war and slower economic growth will support investor demand for gold, Hamilton said that central banks will also be major buyers as it continues to de-dollarize their foreign holdings.

“Since mid-2018, holdings have increased by ~750t. Emerging market de-dollarisation continues,” he said. “…Central banks have been a big support for gold over the past twelve months, and there is no reason why this should fade.”

Although silver is riding on gold’s coattails, Hamilton said that new industrial uses could help the metal create bullish momentum in its own right.

“We see relative outperformance continuing over the coming years helped by solar and 5G buildout, both of which are silver intensive,” said Hamilton. “While silver’s role in solar is well understood, 5G demand is certainly incremental to current forecasts. As this technology operates at higher frequencies (up to 300GHz), increased silver-based electromagnetic shielding is required to reduce exposure.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.