Source: Jin10 Data
Author: Zhu Yu
Analysts say that gold is returning to the global currency system and this will be a long-term trend for the next decade.
BMO Capital Markets expressed that although the gold market may lack bullish catalysts to drive gold prices higher, the price of gold is establishing a solid support bottom.
BMO's commodity analyst updated their forecast for precious metals prices before the third quarter, and raised their bullish prospects for gold and silver.
In the near term, the bank expects the average price of gold to be around $2,263 per ounce this year, up 4% from the previous average estimate of $2,168. Looking ahead to 2025, BMO expects the average price of gold to be around $2,200 per ounce, up 5% from the previous estimate of $2,100. Although gold is expected to remain largely range-bound in the third quarter, BMO expects prices to rise by the end of the year, with an average estimate of $2,350 per ounce in the fourth quarter.
Although gold is expected to remain broadly range-bound in the third quarter, BMO expects prices to rise by the end of the year, with an average estimate of $2,350 per ounce in the fourth quarter.
The analyst pointed out that changes in central bank demand are continuously shaping the investment pattern of precious metals, and is a key factor in explaining why gold largely ignores the impact of Fed rate hikes.
The analyst said, "The most important change may be that incremental gold buyers have shifted from price-sensitive consumers to assets management size-sensitive asset allocators, and then to instruction-driven central banks. This shift, in our view, is a key reason why gold trading prices have been consistently above the cost curve in recent years. In addition, efforts to de-dollarize trade are bringing gold back into the global currency system, which we believe is a long-term trend for the next decade. "
BMO noted that the recent central bank survey released by the World Gold Council showed that an increasing number of emerging market central banks are looking to increase their gold reserves. The analyst said, "In particular, the central banks of emerging markets and developing economies continue to express concern about geopolitical influence and potential financial instability in their reserve management decisions, and more central banks are showing a lower confidence in the continued dominance of the US dollar."
The analyst said, "We believe that as the de-dollarization trend progresses, emerging markets will dominate central bank buying and investment demand."
BMO not only holds a bullish view on gold, but also raised its forecast for silver prices. BMO expects the average price of silver to be $27.30 per ounce this year, up 7% from the initial forecast of $25.60. Looking further ahead, the bank expects the average price of silver next year to be $26.30 per ounce, up 4% from the initial estimate, and by 2026, the average silver price will be around $25.30 per ounce, up 5% from the previous estimate. The prices for 2027 and 2028 are expected to remain around $25 per ounce, up 6% and 2% from the previous forecast, respectively.
Although gold and silver are expected to move in sync, BMO pointed out that silver is still influenced by the global economy. "Compared to gold, industrial demand gives silver greater growth potential, especially in its role in energy transformation." The analyst added:"Silver may benefit from capital expenditures in the global renewable energy and communication sectors, and in the remaining decade, silver performance will be slightly better than gold."
They added, "Silver may benefit from capital expenditures in the global renewable energy and communication sectors, and in the remaining decade, silver's performance will be slightly better than gold."
BMO not only holds a bullish view on gold, but also raised its forecast for silver prices. BMO expects the average price of silver to be $27.30 per ounce this year, up 7% from the initial forecast of $25.60. Looking further ahead, the bank expects the average price of silver next year to be $26.30 per ounce, up 4% from the initial estimate, and by 2026, the average silver price will be around $25.30 per ounce, up 5% from the previous estimate. The prices for 2027 and 2028 are expected to remain around $25 per ounce, up 6% and 2% from the previous forecast, respectively.
Editor/Jeffy