World gold prices maintained their recovery momentum as many major financial institutions remain optimistic about the prospects of the precious metal in the medium and long term. Recently, Morgan Stanley forecast that gold prices could rise to $5,200/ounce by the end of the year, about 10% higher than currently.
In the latest report, Ms. Amy Gower (metal and mining market analyst at Morgan Stanley's research division) said that gold prices have been struggling recently, despite escalating geopolitical tensions in Iran, which is not surprising.
According to this expert, the conflict in the Middle East has caused energy supply fluctuations, causing oil prices to rise sharply and reducing expectations that the US Federal Reserve (Fed) will soon cut interest rates. This makes the safe haven role of gold overshadowed by monetary policy factors.
The sensitivity of gold to monetary policy has now become the main driving force leading prices. This reduces the effectiveness of hedging geopolitical risks and inflation for the precious metal" - Ms. Amy Gower said.
According to Morgan Stanley, the market has now reduced expectations about the number of Fed interest rate cuts this year due to concerns about prolonged inflation. However, the bank still believes that the FED will have at least one cut in interest rates, thereby supporting gold prices to rise.
Morgan Stanley forecasts that the Fed may start lowering interest rates from January 2027 and continue to reduce them further in March 2027. According to Ms. Gower, this will be a positive factor for gold, especially in the context that ETFs are very sensitive to monetary policy signals.
Morgan Stanley experts also noted that gold prices will still largely depend on the developments of conflicts in the Middle East. US President Donald Trump recently said there is "great progress" towards a long-term peace agreement.
Many analysts believe that if tensions cool down soon, the global economy may recover from the current energy shock. However, Morgan Stanley warns that if the conflict lasts, the Fed may maintain high interest rates for longer, even not excluding the possibility of raising interest rates again.
Gold prices may be under pressure if the market begins to expect interest rates to remain high for a long time or continue to rise," Amy Gower warned.
However, Morgan Stanley believes that the potential for gold to fall deeply is also not large because the need for risk hedging is still present in the context of global economic and geopolitical instability.
