BMO keeps long-term price targets at $1400 per oz. gold, $18.25 per oz. silver

BMO Capital Markets forecasts gold prices will rise by 8-16% during the 2021-2024 period, and average above US$1,800 per oz. through 2023, it announced in a research note today.

Average silver prices will increase to US$27.60 per oz. in 2021, up 49% from its previous estimate.

The bank hasn’t changed its long-run price expectations, however, and maintains its price targets of US$1,400 per oz. gold and US$18.25 per oz. silver.

“As we factor in the new Federal Reserve policy of average inflation targeting, as announced at the recent Virtual Jackson Hole Economic Policy Symposium, the net result is likely to be low-for-even-longer interest rates,” the report stated. “With this, we see the precious-positive cycle of macroeconomic policy being prolonged, and have thus increased our short- to medium-term gold and silver price forecasts.”

BMO added that because of this, it has also increased target prices on the precious metals equities in its coverage by an average of 9%.

“From a commodities perspective, it should be acknowledged that ~$2,000 per oz. is a very, very strong gold price,” the report stated. “August was the highest nominal monthly average on record, and back at the 1980 and 2012 peaks on an inflation-adjusted basis.

“In our view, however, unless we see further currency debasement (still a possibility rather than a probability) or real yields drop even further, the story from current levels is not about whether the gold price rises a further 20%. Rather, it is about the duration of gold prices in excess of our long-run equilibrium. Thus, the key factor to watch over the coming years is what the gold mining and refining industry will do with the strong free cash flow set to be generated – an area where there are still bridges being rebuilt following previous missteps in past cycles.”