The successive geopolitical hotspots in January have forced analysts to re-evaluate and adjust the trajectory of gold prices from the base scenario to the upward scenario. Meanwhile, the silver market after a period of excessive speculation is cooling down and is no longer an attractive option at the present time, according to Ms. Helen Amos - Managing Director and commodity analyst at BMO Equity Research.
In a recent interview with BNN Bloomberg, Ms. Amos was asked what she is recommending to colleagues and customers about gold at the present time.
The metal market is still attracting great interest," she said. "It is true that we have experienced many fluctuations, but fundamentally, investors still favor metals and mining stocks. We recommend staying in this market, maintaining positions with gold and copper, these are our top two commodities this year.
There are too many drivers overlapping each other," she added. "Drivers from emerging markets, the trend of deglobalization, the wave of dedollarization, are all bringing clear advantages to precious metals. In addition, retail and investment demand is also very strong and quite sustainable. Reality shows that every time gold prices adjust, the market quickly finds a solid foundation.
Ms. Amos also clarified the BMO's price increase scenario for gold, accordingly, gold prices may approach $6,500/ounce by the end of this year, before reaching $8,600/ounce by the end of 2027.
We use a reversal model to analyze gold prices," she said. "Gold movements are increasingly difficult to keep up, but in general, it can still be explained based on factors such as central bank buying demand, ETF capital flows, the USD index and the real yield of 10-year US TIPS bonds.
“We assume that in the next few years, investment demand will remain at a rate equivalent to or even higher than the first year of Mr. Trump's second term,” she explained. “When factors such as central bank purchases and ETF capital flows are included in the model, the results show that gold prices can completely reach nearly $6,500 by the end of this year. This shows that moving towards higher price levels is not really too difficult.”
In the basic scenario, BMO once predicted that gold prices would fall in the next few months. However, Ms. Amos noted that this scenario was built from December and since then the context has changed a lot.
In January alone, we witnessed a series of geopolitical hotspots," she said - "From Venezuela, Greenland to concerns about the Fed's independence, all happened at the same time. In just a few weeks since the basic scenario was announced, risks clearly leaned strongly towards price increases, i.e., bull case scenarios.
