Gold looks like a contrarian play - BMO
In a research note published Monday, Jackie Przybylowski, metals and mining analyst at BMO Nesbit Burns, said that there had been little focus on gold and more attention on base metals during recent client meetings.
The gold market has been plagued with a lack of investor interest, which has weighed on prices, pushing them below $1,800 an ounce. However, Przybylowski said that this is still a positive environment for the precious metal.
"Does the dearth of interest in precious metals suggest a contrarian buying opportunity? Perhaps," she said. "In the near-term, we expect significant volatility in commodity markets, geopolitical actions, and in the macroeconomic outlook; generally is supportive of gold as a potential counter-cyclical investment."
Although BMO sees some near-term potential in precious metals, they are still relatively neutral through the rest of the year. The bank sees gold prices averaging the fourth quarter around $1,800 an ounce. Looking to 2022, the bank sees prices averaging the year around $1,669 an ounce.
December gold futures last traded at $1,777.70 an ounce, up 0.79% on the day.
Although gold prices are struggling in the near term, Przybylowski said that the mining sector represents value.
"The current market volatility, potential for weakness in the Chinese economy, possible increased geopolitical instability, especially in Peru and Chile, and ongoing delays to global reopening as the world wrestles with COVID variants could spur investor interest in golds equities," she said. "The current low interest level in the sector could provide an attractive entry point, in our view."