Author: Paul Ploumis14 Jan 2015 Last updated at 01:03:31 GMT

(Kitco News) - The gold market has started off the year on a strong note, but prices are expected to decline after the first quarter, according to analysts from Bank of Montreal Capital Markets.

The Canadian bank released an updated forecast for the precious metals markets on Sunday and remains bearish on gold and silver as weaker oil prices as well as the U.S. dollar dominate the marketplace. The bank expects gold to average $1,170 an ounce in 2015, down from their previous forecast from $1,190 an ounce.

“BMO Research generally expects Q1 to be the strongest price period for gold given seasonality related to historical buying patterns in India and China,” they said.

For silver, the bank now expects the metal to average at $15 an ounce, down from the previous forecast of $17.50. The bank also expects silver to underperform gold in 2015.

According to the report, BMO has a fairly long-term bearish outlook on gold, expecting that the price could end up consolidating within a range for an extended period of time.

“In BMO Research’s view, assuming the global economy muddles through one of the slowest recoveries on record, gold prices could simply remain rangebound for many years. If history (1982–2002) is any indicator, BMO Research expects a realistic range could be US$850–1,300/oz for the next 20 years,” the report said.

The analysts add that they are expecting to see more volatility in the gold market as prices adjust to the tug of war between rising U.S. interest rates and safe haven demand in the eurozone, Ukraine, Russia and Japan.

Although weaker oil prices are expected to drag gold prices lower, BMO analysts said the biggest risk to the market is the U.S. dollar, which is expected to push higher.

“BMO’s FX Strategy team continues to expect the U.S. dollar maintains a secular upward trend, even from current levels,” the report said.

Finally, despite strong consumer demand expectations, especially out of Asia and India, BMO said this will have a limited impact on the marketplace, adding that continued ETF outflows demonstrates the “investor apathy” in the gold market.

“Certainly, consumer demand in China and India can impact regional physical premiums during higher periods of demand, but it does not necessarily translate into a higher fix price,” the report said.

Courtesy: Kitco News