(Kitco News) - The U.S. government is once again on the cusp of a shutdown, bringing renewed focus to the nation’s burgeoning debt. One Canadian bank believes this will be the latest driving force for gold through year-end.
On Tuesday, commodity analysts at BMO Capital Markets published their fourth-quarter price forecasts, making significant upward revisions to gold and silver.
The bank expects gold prices to average around $3,900 an ounce in the final three months of 2025, up 8% from its previous forecast. Analysts are not expecting the rally to end anytime soon, with prices projected to rise above $4,000 an ounce next year.
BMO now sees average prices in 2026 reaching $4,400 an ounce, up 26% from its earlier forecast.
The shifting landscape in global financial markets is also prompting the bank to upgrade its long-term outlook. BMO projects long-term gold prices will average $3,000 an ounce, up from its previous estimate of $2,200.
“The last 2–3 years have witnessed a number of profound shifts in the geopolitical and financial system that have brought arguably lasting changes in the demand landscape for gold,” the analysts said.
Analysts have pointed to growing geopolitical and economic turmoil as significant drivers of gold’s unprecedented rally over the last three years. However, BMO said much of this volatility can be traced back to unsustainable growth in U.S. government debt levels.
They added that concerns surrounding U.S. debt are now moving to the forefront.
“When it comes to explaining the ongoing price rise of recent years, analysts have largely been able to take their pick of drivers (geopolitical concerns, debt concerns, safe-haven demand, sticky inflation, de-dollarisation…). While these have all contributed to some degree, we believe that concerns over Western sovereign debt are a key overarching driver, with the threat of potential monetary debasement making the notionally high yields on long-dated treasuries comparatively unattractive compared to gold,” the analysts wrote.
“As concerns over Western debt have become more mainstream in 2025 (especially following the One Big Beautiful Bill and ongoing political issues in France), we have seen more traditionally risk-tolerant tranches of the investment community choosing to add gold to their portfolios as a hedge against the long-term devaluation of fiat, as shown through strong gold ETF flows. Given that there seems to be no viable solution to the growing sovereign debt pile in the West, we think it is safe to assume that interest in gold will continue to expand,” they added.
In the current environment, BMO analysts said they see gold investment demand on the verge of entering mainstream portfolios for the first time in decades.
While BMO remains bullish on gold, the bank expects silver to continue outperforming through year-end. It forecasts silver prices will average around $45 an ounce in the fourth quarter, up 41% from the previous estimate.
The silver rally is expected to continue into 2026, with prices projected to reach $50 an ounce in the second quarter of next year. BMO now sees silver averaging $49.50 an ounce in 2026, up 57% from its earlier projection.
Along with investment demand supported by gold’s rally, BMO analysts expect silver prices to remain well supported due to strong industrial consumption.
“Silver simply cannot decouple itself from the fortunes of gold, and the two will typically move together in any given cycle. However, silver does offer more torque at points of inflection, partly due to liquidity, and partly due to the way the market trades. Relative to gold, there is greater potential for meaningful industrial demand growth and, importantly, an energy transition angle through use in photovoltaics and power grids,” the analysts said. “Consequently, we see silver in a persistent deficit for the foreseeable future, and prices will likely need to remain elevated near current levels in order to stimulate a flow of much-needed material from above-ground investment stockpiles into industrial working inventories.”
