BMO Capital Markets has become bullish on precious metals -- specifically gold and silver stocks. 

As a result of "tailwinds" supporting a 20% rise in gold and silver prices through the first part of 2016, the analysts believe the rise in prices will continue over the "medium term," lending them more confidence in their gold and silver price targets of $1,400 per ounce for gold and $22.50 per ounce for silver by the end of the first quarter of 2017, according to a note by BMO Capital Markets analysts on Wednesday.

The analysts upgraded six gold and silver equities -- including five to outperform ratings -- in the report. BMO Capital Markets is a subsidiary of Bank of Montreal.

According to the report, the analysts' bullish thesis is based on:

  • Increased metal price expectations as rate hikes in the U.S. continue to be deferred;
  • Fund flows within the materials equities -- the analysts expect base metals and bulk materials to underperform and generalist companies (especially in Canada) to be "forced to buy golds or risk underperforming the benchmark;" and
  • "Continued discipline as the miners continue to mark reserves below US$1,200/oz."

Rising gold prices and improving silver fundamentals led the analysts to upgrade a basket of equities, including Yamana Gold(AUY) - Get Report , Pan American Silver (PAAS) - Get Report , Coeur Mining(CDE) - Get Report and Silver Wheaton (SLW)  , each to outperform from market perform. BMO Capital Markets also upgraded Detour Gold, which is not traded in the U.S., to outperform and Oceana Gold, an Australian company not traded in the U.S., to market perform from underperform.

Despite the more positive outlook, the analysts caution that a number of stocks have already accounted for higher gold and silver prices. The analysts downgraded three stocks -- Agnico-Eagle(AEM) - Get Report , Franco Nevada(FNV) - Get Report and Fortuna Silver Mines (a Peru-based company not traded in the U.S.) -- to market perform from outperform.

Including the upgrades this week, here are nine U.S.-traded metals stocks that BMO Capital Markets rated outperform.