The start of the Federal Reserve's new easing cycle has sparked a new momentum for gold. Although lower interest rates will continue to support investment demand, a Canadian bank believes that the increasing importance of gold as a global monetary metal is a greater driver of long-term prices.

Late on Tuesday, commodity analysts at BMO Capital Markets released their latest commodity price forecasts, highlighting that gold is their most significant increase before the fourth quarter.

In the short term, the bank expects the average gold price in the fourth quarter to be about $2,700 per ounce, a 15% increase from the previously forecasted $2,350 per ounce. Record gold trading is already close to BMO's new price target. December gold futures last traded at $2,687.20 per ounce, up 0.38% for the day.

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Looking at gold over the next 12 months, the Canadian bank expects the average price in 2025 to be about $2,663 per ounce, a 21% increase from the previously estimated $2,200. The bank also updated its long-term price forecast to $1,900, a 15% increase from $1,650 per ounce.

BMO noted that the Fed's rate cuts, which are currently leading the global easing trend, will be bullish for gold; however, analysts are increasingly focusing on the role of the precious metal as a global currency.

Analysts said it is clear that "as the trend towards trade de-dollarization accelerates, gold is being reintegrated into the monetary system."

BMO said that as the global economy slows down, it expects the role of gold as a global trade currency to continue to grow in 2025. They continue to focus on China's dominant position in global trade.

The report said: "We believe that the broader market still underestimates China's trade focus on emerging markets. In addition, closely related to this is the rapid de-dollarization of trade."

BMO noted that although the international usage rate of the renminbi is still relatively low, it reached a historical high this year. Analysts added that they expect renminbi trade to continue to grow in the coming years.

"It is worth noting that in recent months, more than 50% of China's import and export transactions have used the renminbi, and we believe this is crucial for the gold market. Given China's shift towards emerging markets, and the difficulties many commercial banks face in gaining access to the renminbi, we believe this is crucial for gold, which is being used as a trade medium to support renminbi-priced transactions," said the analysts.However, it's not just China that continues to shift away from the US dollar towards diversification. Bank of Montreal notes that other BRICS countries—Brazil, Russia, India, South Africa, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates—are also abandoning the US dollar.

Bank of Montreal warns that the new mBridge project, supported by the Bank for International Settlements, could change the game for gold and the entire commodity complex. The project will create a multi-central bank digital currency (CBDC) platform to support real-time, peer-to-peer, cross-border payments and foreign exchange.

Analysts say: "Reports indicate that the mBridge trade unit will be composed of 60% BRICS currencies and 40% gold, which must be deposited in an escrow account. Given the vast trade volume this could cover, and the participation of major countries like Saudi Arabia, this could have a significant impact on gold demand in the coming years."

Meanwhile, the diminishing role of the US dollar as the world's reserve currency will also push up broader commodity prices.

Although the future of gold is clearly bright, Canadian banks are not optimistic about other precious metals. Bank of Montreal only slightly raised its target price for silver.

Bank of Montreal expects the average silver price in the fourth quarter to be about $30 per ounce, a 5% increase from the previously forecasted $28.50 per ounce. Looking ahead to next year, analysts expect the average precious metal price in 2025 to be about $27.30 per ounce, a 4% increase from the previously estimated $26.30.

In the long term, the bank expects the average silver price to be around $24.50 per ounce, an 11% increase from the previously estimated $22 per ounce. The bank optimistically believes that growing industrial demand will continue to support silver; however, investment demand may continue to struggle.

Analysts say: "Compared to gold, we believe that investment demand is more driven by retail-led micro asset allocation rather than macroeconomic fund flows. Therefore, one challenge silver will face is the steady growth of investment options available to retail investors, especially in emerging markets."