Thoughts

February 13, 2026 | 13:56

Precious Metals: The Sky’s the Limit or Ready to Reset?

Economist

Senior Economist and Director
Economics

Sarah Howcroft conducts risk analysis across a range of countries and industries in which BMO has strategic inte... (Read more)

Sarah Howcroft , CFA

Senior Economist and Director
Economics

Sarah Howcroft conducts risk analysis across a range of countries and industries in which BMO has strategic inte... (Read more)

The cascade of risk-off events in the opening weeks of 2026 (i.e., Venezuela, Greenland, Iran, Fed probe, tariff threats) triggered investor alarm and a flood of money pouring into precious metals. Safe-haven momentum drove gold and silver prices to record highs of US$5,500/oz and $120/oz, respectively, in late January before both succumbed to a rapid correction. The sell-off can largely be attributed to i) the announcement of Kevin Warsh as the next Fed Chair nominee (widely seen as more hawkish than the other frontrunners); and ii) China hiking margin requirements and briefly halting trading in select gold and silver funds. While prices have since settled down, the recent episode underscores the outsized volatility of precious metals markets, which are still relatively small in size compared to global equities but increasingly easy for investors to access (i.e., ETFs, online trading platforms).

Where do prices go from here? It’s hard to predict given the extreme runup in prices, so we explore a range of outcomes. Our base case projections—US$4,600/oz for gold and $60 for silver on an annual average basis—sit a touch softer than current levels but well above levels prevailing until late last year. The base case is predicated on some easing of geopolitical/economic risk premiums, measured Fed rate cuts totaling 75 bps by end-2026, moderate U.S. dollar softening, and continued sturdy, but not accelerating, central bank accumulation.

That said, risks still appear skewed to the upside. In a more bullish scenario, the near-constant state of policy uncertainty and rising desire for non-fixed income portfolio diversification continues to fuel the rotation into precious metals. By many accounts, gold is still widely under-allocated in institutional and retail portfolios, particularly among Western investors. This scenario could be accompanied by a deeper slowdown in the U.S. economy leading to more aggressive Fed easing, and/or augmented central bank buying. It’s worth noting that central bank accumulation cooled last year (down ~20%) from the 1,000+ tonne annual pace since Russia’s invasion of Ukraine in 2022. Silver could outperform gold on the upside, despite potentially weaker industrial demand and its not being a monetary reserve asset, as investors seek out alternative (i.e., non-gold) safe havens.

Conversely, precious metals bears (mostly in hibernation) could point to the ongoing disconnect between market pricing and fundamentals as a reason to be cautious. Global growth forecasts have been continually revised higher over the last year, with BMO Economics now looking for a 3.2% advance in 2026—consistent with historical norms and far from red flag territory. Moreover, the latest U.S. jobs report landed on the strong side, though not uniformly—again, not screaming for urgent rate cuts. In a tail-risk scenario, a pivot to monetary tightening and/or potential resolution of geopolitical conflicts (i.e., Russia-Ukraine, Middle East) could lead to a sharp unwinding of precious metals hedging.

Bottom Line: While there is a wide range of outcomes for precious metals prices, we place more emphasis on the upside risks given the continued abundance of policy/economic/geopolitical uncertainties. In any event, it seems clear that higher volatility is here to stay.