BMO Capital Markets Says These 9 Gold and Silver Stocks Will Outpeform

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) , Pan American Silver (PAAS) , Coeur Mining (CDE) 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) , Franco Nevada (FNV) 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.

1. Coeur Mining
1. Coeur Mining

BMO Capital Markets analyst Jessica Fung upgraded Coeur Mining (CDE) to outperform from market perform and raised her price target on the stock by $3 to $11.

2. Pan American Silver
2. Pan American Silver

BMO Capital Markets analyst Jessica Fung upgraded Pan American Silver (PAAS) to outperform from market perform and raised her price target on the stock by $7.50 to $19.

3. Silver Wheaton
3. Silver Wheaton

BMO Capital Markets analyst Andrew Kaip upgraded Silver Wheaton (SLW) to outperform from market perform and raised his price target on the stock by $4.50 to $24.

4. Yamana Gold
4. Yamana Gold

BMO Capital Markets analyst Andrew Kaip upgraded Yamana Gold (AUY) to outperform from market perform and raised his price target on the stock by $1 to $5.50.

5. Newmont Mining
5. Newmont Mining

Newmont Mining (NEM) is BMO Capital Markets' top pick among large gold producers. Analyst Andrew Kaip has an outperform rating on the stock and raised his price target on the stock by $6.50 to $41.50.

6. Barrick Gold
6. Barrick Gold

Barrick Gold (ABX) is rated outperform by BMO Capital Markets. Analyst Andrew Kaip raised his price target on the stock by $3.50 to $21.

7. Goldcorp
7. Goldcorp

Goldcorp (GG)  is rated outperform by BMO Capital Markets. Analyst Andrew Kaip has a price target on the stock of $21.50.

8. Kinross Gold
8. Kinross Gold

Kinross Gold (KGC) is rated outperform by BMO Capital Markets. Analyst Andrew Kaip has a price target on the stock of $6.50.

9. Helca Mining
9. Helca Mining

Hecla Mining (HL) is rated outperform by BMO Capital Markets. Analyst Jessica Fung raised her price target on the stock by 50 cents to $6.

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