According to analysts at BMO Capital Markets in Canada, the strong increase in gold and silver reflects a shifting order in the global financial markets. The driver is less a single event and more a growing uncertainty about how resilient government balance sheets will remain in the long term – and how resistant fiat currencies are in an environment of increasing geopolitical and economic tensions. In a recent report, BMO undertakes a thought experiment: What assumptions would have to apply for gold to enter another, significantly higher price phase in the coming quarters?
The starting point is a market movement that has overtaken even ambitious forecasts. According to this, gold already rose above the mark of 5,000 US dollars per ounce in the first month of the year and was thus above the levels expected by BMO in December for the first quarter. For the analysts, this is an indication that classic forecasting models sometimes react too slowly – because the underlying conditions change faster than historical data can reflect.
Gold as an Indicator of the State of the Global System
BMO describes a central thesis: A look at gold and precious metals is essentially a bet on the future structure of the global financial system – and on the transition that leads there. The analysts link the recent price surge with the feeling that the world is moving towards a “new order” in which two dominant spheres of influence may emerge. States and actors in between could come under greater pressure to align themselves – an environment in which gold gains importance as a reserve and hedging instrument.
At the same time, BMO emphasizes that support for gold does not come exclusively from the USA. Although the return of the so-called “Sell America” narrative – with pressure on the US dollar and bond markets – has provided new buying impulses. But the analysts refer to parallel signals from other regions. For example, there has recently been a strong sell-off of Japanese bonds, accompanied by significant movements in the yen. From BMO’s point of view, such developments fuel additional doubts about which investments will reliably function as a “safe haven” in a stressful market environment – which could more broadly support the demand for gold.
Which Assumptions BMO Uses in the Bull Case for Gold
At the center of the thought experiment is a “bull case” scenario, which BMO explicitly describes as a model calculation. For this, the analysts “stretch” their input assumptions towards an environment in which investors of various types continue to increase gold – at a pace that corresponds to or even exceeds the first year of Trump’s second term. Specifically, BMO is working in this scenario with, among other things, average quarterly central bank purchases of around 8 million ounces and ETF inflows of around 4 to 5 million ounces per quarter. In addition, there are assumptions about a continued erosion of real returns and a weaker US dollar.
Under these conditions, BMO derives a possible price level of around 6,350 US dollars per ounce for gold by the fourth quarter of 2026. For the fourth quarter of 2027, the bull case model mentions about 8,650 US dollars per ounce. At the same time, the bank makes it clear: This is not yet an official adjustment of the forecasts published in December. The reason is remarkable: BMO currently sees less of a “falsification” of individual parameters, but a fundamental problem with many forecasting models. These are often too strongly historically calibrated and can only inadequately capture upheavals on the scale of a system shift – which BMO classifies in its note as the largest since the post-World War II era.
It fits in with this that BMO relativizes the informative value of long data series. A model that goes back significantly further than five years is, from their point of view, not well suited to explain the current gold price. In an updated five-year regression approach, the analysts see the strongest statistical significance in two variables: central bank holdings and ETF flows. Although an overall negative relationship between the US dollar, long-term US yields and gold is also evident in the period under consideration, even this correlation is not stable. Since 2020, BMO has observed a negative correlation between gold and the dollar index DXY in only 78% of the time. Striking: The relationship to stock markets, historically rather weak, has recently turned positive.
Silver Catches Up: Gold-Silver Ratio Falls Below 50
Parallel to gold, silver is moving more into focus. BMO points out that silver has also increased significantly and has exceeded the mark of 100 US dollars per ounce. This means that the gold-silver ratio has fallen to new multi-year lows – below 50 points. Back in December, BMO had assumed that gold was likely to outperform silver because gold is classically perceived as a monetary “safe haven” anchor. Now, however, the analysts are outlining an environment in which silver could relatively outperform the yellow precious metal price.
The core of this consideration: The new global risk environment – reinforced by retail participation – could also attribute a stronger protective function to the “non-gold” precious metals, although these are traditionally more influenced by industrial factors. As an anchor point for a bull case, BMO assumes that the gold-silver ratio moves in the range of 40 to 50 over a longer period, i.e. at the lower end of the 30-year range. From this, the bank derives model silver prices of about 160 US dollars per ounce by Q4 2026 and about 220 US dollars per ounce by Q4 2027.
The bottom line is that BMO provides less of a “new official forecast” than a map of possible price ranges – depending on whether central banks, ETF investors and the interest rate and currency environment support the current trend in gold and silver over several quarters.
