Gold prices are regaining some momentum as they test resistance near $4,700 per ounce. Although the precious metal has yet to return to previous key price levels, Morgan Stanley believes gold’s upward trend is not over.

According to Amy Gower, Metals & Mining Commodity Strategist at Morgan Stanley Research, gold prices could end the year around $5,200 per ounce, representing an increase of roughly 10% from current levels.

What is notable is that gold has not reacted as strongly as a traditional safe-haven asset, despite elevated geopolitical tensions in the Middle East. The main reason is that the conflict has increased risks to energy supply, pushed oil prices higher, and raised inflation concerns.

In this environment, markets have begun to reduce expectations for near-term Federal Reserve rate cuts. This has put pressure on gold, as the metal is now more sensitive to monetary policy and real yields than to its traditional safe-haven role alone.

Morgan Stanley still sees room for gold to move higher if the Fed shifts toward a more accommodative policy stance. The bank expects one rate cut in January, followed by another in March 2027. This could support gold prices, especially as ETF flows tend to respond strongly to monetary policy signals.

However, gold’s outlook remains highly dependent on developments in the Middle East. If the conflict continues for longer, inflation risks and elevated oil prices could lead markets to expect the Fed to keep interest rates higher for longer, or even consider further rate hikes. This would be a negative factor for gold.

On the other hand, if tensions ease quickly, pressure from the energy market could cool. However, Morgan Stanley also notes that upside in a resolution scenario may be limited, as already elevated gold prices could constrain demand from ETFs, central banks, and consumers.

Conclusion

Morgan Stanley’s $5,200 per ounce forecast suggests that gold is still viewed as having medium-term upside potential. However, the key driver for gold is no longer just geopolitical risk. Instead, prices are increasingly influenced by real yields, Federal Reserve policy expectations, and oil market developments.

At this stage, investors should monitor both fundamental and technical factors, rather than viewing gold purely as a safe-haven asset.

Source: Kitco

Disclaimer: This article is for research and informational purposes only and does not constitute investment advice. Trading in financial markets involves risk.