Bank of Montreal sees $1,400 gold as more hedge funds pile in
Add the Bank of Montreal to the list of major financial institutions that have become bullish on precious metals.
Its projecting that gold will hit $1,400 by the end of first-quarter 2017, up from its previous forecast of $1,200, while it sees silver reaching $22.50 by the same time.
Fed policy key to golds movement: The BMO analysts hedged their optimism by insisting that their forecasts hinge on the Federal Reserve keeping interest rates lower for longer. Maybe the Fed does decide to hike rates in July which would be the biggest downside shock for gold prices, in our view, they said.
They also conceded that gold could see another traditional summertime dip that might damage sentiment.
Gold prices nearly always decline between May and July, Canadas Globe and Mail newspaper noted. If that pattern, which has held true in 36 of the past 40 years, continues, it could deflate the enthusiasm around precious metals.
We are not advocating an extreme doom-and-gloom and $10,000-an-ounce gold price argument, they said.
Big funds load up on bullion exposure: BOM is bullish, and so are some major hedge funds, recent federal filings show. Jana Partners now owns gold for the first time since December 2014, according to Reuters. Barry Rosensteins fund bought 50,000 shares, worth almost $6 million, of the worlds largest gold-linked ETF.
Meanwhile, CI Investments Inc., an investment manager of Toronto-based CI Financial Corp., almost quadrupled their stake in the ETF, becoming the sixth-largest shareholder, Reuters noted.
CI purchased 2.81 million ETF shares to bring the total values of its bullion holdings to $441 million. It also has interest in various gold mining companies.
The buying by some of the largest gold investors highlights how funds rushed back into bullion ETFs, which are backed by physical gold, as expectations that the U.S. Federal Reserve would continue to raise interest rates fade, Reuters added.
The rising tide of bullishness has raised gold ETF holdings to their highest levels in years. The great gold rush of 2016 is gathering pace, Bloomberg reported. Holdings in exchange-traded funds have now surged by a quarter,with investors taking advantage of lower prices over the past two weeks to enlarge stakes on rising concern about central bank policy making worldwide. The holdingshave increased to 1,822.3 metric tons, the most since December 2013.