Morgan Stanley Bullish; Gold Rally Likely to Continue
Morgan Stanley assesses that gold prices have reached their fourth-quarter target ahead of schedule. The bank had previously targeted a price of around US$4,450 per troy ounce, a level that was hit early. Looking toward 2027, Morgan Stanley sees the potential for gold to rise above US$5,000 per troy ounce, although the path to that level is expected to remain volatile.
A key driver is the easing of expectations regarding Federal Reserve interest rate hikes. Morgan Stanley notes a resurgence in demand for gold ETFs, with an inflow of approximately 70 tonnes in July and August, following outflows of about 93 tonnes in May and June. The bank's economists project that the Fed will maintain interest rates throughout 2026.
Central bank demand also remains a crucial support factor. China has reportedly added about 60 tonnes of gold so far this year—the largest amount since 2023. Poland has also purchased approximately 82 tonnes, bringing its total holdings to 632 tonnes and edging closer to its target of around 700 tonnes.
Morgan Stanley also observes a shifting relationship between gold and long-term real yields. In early August, gold managed to rise even as long-term yields remained relatively stable. According to the bank, the gold market currently appears to be pricing in concerns regarding US fiscal issues—which underlie high yields—rather than focusing on the yield levels themselves.
Fiscal factors have gained prominence following the US Treasury's move to expand its long-term bond buyback program. This policy has helped suppress yields while reinforcing the view that the government is taking a more active role in maintaining bond market stability. Such conditions could indirectly support gold if confidence in dollar-denominated assets and government debt begins to waver.
Newsmaker Analysis: Morgan Stanley’s projections reinforce a bullish medium-to-long-term outlook for gold, driven by central bank buying, ETF inflows, US fiscal concerns, and a reduced likelihood of Fed rate hikes. However, the journey to US$5,000 is unlikely to be a straight line. US inflation data, shifting interest rate expectations, and relatively low COMEX short positions could trigger a sharp correction amidst the upward trend. (arl)
Source: Newsmaker.id
