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Gold to outperform silver in 2023 as BMO raises price forecasts

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(Kitco News) - Physical demand for gold is expected to be robust and push gold prices above $2,000 an ounce in the next three months as investors look for safe-haven assets to protect themselves from the growing banking crisis, according to commodity analysts at BMO Capital Markets.

Wednesday, the Canadian Bank increased their gold and silver price forecast for 2023. The analysts said that they see gold prices averaging the year around $1,906 an ounce, up 13% from the previous forecast. BMO sees the gold market peaking in the third quarter with an average price of $1,950 an ounce, up 17% from its last estimate.

Looking further out, the bank has upgraded its gold prices by 7%, seeing long-term prices averaging around $1,500 an ounce.

"We have revised up our gold and silver forecasts, on broader uncertainty and financial instability, which has seen interest rate expectations pulled down, and against a backdrop of robust physical demand," the analysts said in the report.

BMO is also bullish on silver but to a lesser extent than gold. The Canadian bank sees silver prices averaging the year at $22 an ounce, up 8% from the initial forecast.  The analysts said they expect silver to also peak in the third quarter with an average price of  $22.30 an ounce, up 9% from the previous estimate.

Long-term BMO sees average silver prices of $21, up 5% from the previous estimate of $20.

Along with gold and silver, BMO said it is increasing the majority of its price estimates for this year. However, the analysts noted that uncertainty continues to dominate sentiment within the global market.

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"The risks of a global recession have risen since the onset of the U.S. banking crisis. However, it is still early and the situation is far too fluid to make a firm call. In the meantime, BMO Economics continues to look for global growth of 2.5%, a pace which was upgraded earlier this year (was 2.3%), in light of stronger U.S. and Canadian growth, and as the Euro Area and the U.K. took a step back from expectations of a deep recession," the analysts said. "If U.S. financial conditions tighten and a pullback in credit is observed, then a rethink of the economic growth call will be required."

The analysts noted that a banking crisis pushing the world into a recession could weigh on industrial base metals and further boost precious metals.

The Bank is the most bullish on molybdenum, increasing its price forecast by 59% to $28.60  per pound, up from the previous estimate of $18 per pound. The bank has increased its outlook for the critical metal due to supply concerns in Chili, representing about 20% of the global market.

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.