Morgan Stanley sees gold prices climbing to $5,200 despite geopolitical volatility
The gold market is seeing some renewed momentum, with prices testing new resistance at $4,700 an ounce. While it still has some way to go to regain key price levels, one investment bank expects prices to eventually move higher.
In her latest precious metals note, Amy Gower, Morgan Stanley Research’s Metals & Mining Commodity Strategist at Morgan Stanley, reiterated her call for gold prices to end the year around $5,200 an ounce, up roughly 10% from current prices.
Gower added that she is not surprised gold has struggled in recent months despite heightened geopolitical uncertainty from the ongoing war in Iran.
“With the conflict triggering an energy supply shock that has reduced hopes for lower U.S. interest rates, it is not surprising that gold has struggled to work as a safe haven this time,” said Amy Gower, Morgan Stanley Research’s Metals & Mining Commodity Strategist.
“Gold’s sensitivity to monetary policy has taken over as the key price driver. This has overshadowed its safe-haven status and reduced its effectiveness as a hedge against both geopolitical and inflation risks. Gold prices reflect not just the impact of a particular event but, more importantly, the policy response that follows.”
High oil prices, driving inflation pressures, are forcing the Federal Reserve to reevaluate its easing policy stance and, as a result, markets have started to price out rate cuts this year. However, Morgan Stanley is still betting on at least one rate cut this year, which will support higher gold prices.
“Gold is likely to remain sensitive to real yields, but we see room for further upside,” Gower said.
Morgan Stanley sees one rate cut in January followed by another rate cut in March 2027.
“This should benefit gold, with ETF purchasing decisions particularly sensitive to policy signals and gold now realigning with real rates,” Gower said.
As indicated by the current market volatility, gold’s future depends heavily on what happens with the conflict in the Middle East. Overnight, President Donald Trump said that great progress is being made toward a lasting peace agreement.
Analysts have said that if the crisis ends soon, the global economy should be able to recover from the current energy supply crisis. However, Gower added that the longer the conflict continues, the greater the risks are for gold.
“Gold prices may suffer if markets begin to anticipate prolonged rate holds or even hikes,” Gower warned. “At the same time, upside in a resolution scenario could be limited, as already elevated prices may constrain demand from ETFs, central banks and consumers.”
