BMO increases gold price forecasts

BMO Capital Markets has increased its 2008 and 2009 gold price forecasts to $800 oz, whilst at the same time raising the long-term forecast to $600 oz.

The US-based financial service provider has also increased price forecasts for silver and platinum saying that it was “reflecting the view that other precious metals prices cluster around the broad trends set out by gold”.

BMO analysts have raised the 2008 silver price forecast from $14.50 oz to $15.50 oz and for 2009 from $15 oz to $16.50 oz. The long-term silver forecast remains at $12.50.

The platinum forecast for 2008 has been increased from $1,225 oz to $1,350 oz; for 2009 from $1,100 oz to $1,200 oz. The long-term platinum forecast remains at $1,000 oz.

The analysis takes into account that so far in 2007, gold has outperformed most major stock markets, broad base metal price indices, currencies and bonds.

The factors noted in the performance of gold include a weakening US dollar, concerns over inflation and investors turning away from areas of high risk.

BMO also sees the possibility of the Euro being devalued to protect trade balances with China, other emerging economies, and the US.

In addition, gold is likely to continue to be a popular hedge against increasing oil and food prices and investors’ potential capital losses in bond portfolios.

At the same time, sales of gold in China, India and the rest of the developing world are expected to increase with rising middle class incomes.

Finally, the future price of gold will also be affected by production costs, which are rising substantially as a result of increased energy costs and a shortage of labour and machinery.