(Kitco News) - Investor disappointment continues to grow as gold prices struggle in the face of ongoing chaos in the Middle East; however, despite continued selling pressure, many banks are not changing their long-term forecasts.
On Tuesday, the Bank of Montreal published updated commodity price forecasts. Despite the current headwinds, the Canadian bank remains bullish on gold and silver.
The commodity analysts warned that gold and silver could continue to trend lower, impacted by shifting economic conditions caused by the U.S. and Israel’s war with Iran, but they said the market's bullish momentum has only paused, not reversed.
“The Iran conflict does not take away from the structural thesis for metals and mining, but adds weight to it. It's just a question of when the market gains enough confidence that the conflict has reached a resolution before adding risk back on,” the analysts said.
In BMO’s updated price forecast, the analysts see gold prices averaging around $4,800 an ounce in the third quarter, up 7% from the previous forecast, and averaging $4,900 in the final quarter of the year, up 9% from the prior estimate.
The bank sees gold prices averaging $4,846 an ounce this year, up from the prior estimate of $4,550 an ounce.
At the same time, BMO is extremely bullish on gold through 2027, with prices expected to remain consistently above $5,000 an ounce and average $5,125 annually, up 26% from previous estimates.
BMO is also bullish on silver, but they expect more volatility. The bank sees silver prices averaging $70.60 an ounce in the third quarter, an increase of 28% from the previous estimate. Meanwhile, fourth-quarter prices are expected to average around $68.10 an ounce, up 31% from the prior forecast.
The analysts see silver prices averaging $74.50 an ounce this year, up 32% from the previous forecast. However, this year could represent the high-water mark for silver. Prices are expected to average around $64.20 next year, up 42% from the prior projection.
Looking at near-term price action, BMO analysts said gold and silver will be vulnerable to shifting speculative momentum among retail investors.
“We think retail investors account for at least 60% of ETF inflows, so it can't be denied that the psychology of retail investors, where momentum plays an important role, will have a strong bearing on gold prices over the months ahead, particularly following the outbreak of the Iran conflict. Historically, gold has performed better over the first few weeks of a major conflict than it has so far during the Iran conflict. But much is different this time, not least the fact that gold prices have already appreciated significantly over the last two years thanks to huge inflows of new investment, both speculative and strategic,” the analysts said. “The long-term bull thesis for gold remains intact in our view – diversification, debasement, de-dollarisation – but we may have to wait for the conflict to resolve for sellers to turn into buyers again.”
Although silver prices are expected to continue trending higher, the analysts have taken a more cautious stance as the war in the Middle East dampens global economic activity, hurting industrial demand for silver.
The bank said it expects the physical silver market to return to a surplus, which could ease pressure on recent liquidity-driven price gains.
“While the argument for hard assets remains strong in 2026, we see the lesser precious metals as a poor substitute for gold and expect the discount to gold to continue to widen this year,” the analysts said.
