Against the backdrop of a possible global recession and easing interest rates, analysts expect gold prices to rise over the next few years and flagged more upside yet to be realized for investors looking at gold equities.
Citigroup, ANZ and BMO Capital Markets analysts revised their outlook for precious metals upward.
With gold recently reaching a six-year high, Citi said gold prices could breach US$2,000 per ounce in the next year or two as they expect lower interest rates and U.S.-China trade tensions to further boost prices, though the analysts cautioned that a breakthrough in trade negotiations or a sharp upturn in global manufacturing data would probably suggest a peak for gold at US$1,550/oz for this cycle, Bloomberg reported.
Australia's ANZ analysts said investors will continue to shift their strategic portfolio positions in favor of gold, citing falling U.S. Treasury yields, inverted yield curves, rising recession fears and easing interest rates as positive drivers.
Elsewhere, analysts at Canada's BMO raised estimates for gold to US$1,506/oz for 2020 while retaining their long-term forecast at US$1,200/oz. As for silver, BMO predicted the price will rise to US$18.60/oz in 2020 without changing its long-term estimate of US$17.30/oz.
In addition to factors including potential for liquidity injections from central banks and escalated trade tensions, BMO analysts also believe that lower bond yields and stronger demand for physical gold from exchange-traded funds and futures markets are providing support for precious metals.
"A low-yielding bond world, where central banks are falling over each other to ease, gold and silver become ever more appealing from a tactical asset allocation perspective," BMO analysts wrote in a Sept. 11 note.
Based on the current fundamentals, the bank added Lundin Gold Inc., Newmont Goldcorp Corp., Wesdome Gold Mines Ltd., Pan American Silver Corp. and Orla Mining Ltd. to its preferred stock list while removing B2Gold Corp. and Premier Gold Mines Ltd. from its portfolio. Newmont was upgraded to "outperform" from "market perform," while Silvercorp Metals Inc. was downgraded to "market perform" from "outperform." BMO also updated its target price for Kinross Gold Corp. shares to US$5.50, with an upside potential of 38%.
BMO raised OceanaGold Corp. to "outperform" as it sees attractive valuation based on the current share price levels after the company's stock experienced a decline this year, mainly due to the temporary suspension of its Didipio project. The analysts anticipate a return to normal operations at Didipio by the end of this financial year.
As for the Haile project, BMO estimates production will reach the low end of the guided range of 140,000 to 160,000 ounces in 2019 and sees the hiring of a new mine manager as a positive step toward achieving operational consistency.
"Having lagged its peers, the company's valuation has become increasingly attractive. As our C$5.00 target price remains unchanged, current price levels indicate the potential for a 65% total return," BMO analysts said.
