Morgan Stanley: Gold Could Hit $5,200 Despite Diminished Safe-Haven Role Amid Energy Crisis and Interest Rates

The gold market is witnessing a renewal of bullish momentum, with prices testing new resistance levels near $4,700 per ounce. While the precious metal still requires further gains to reclaim pivotal price milestones, a major investment bank forecasts that the upward trend will persist in the coming period.

In its latest report on precious metals, Amy Gower, Commodities, Metals, and Mining Strategist at Morgan Stanley, reaffirmed her projections for gold prices to reach approximately $5,200 per ounce by the end of this year—an increase of nearly 10% compared to current levels.

Gower added that she finds it unsurprising that gold has struggled in recent months despite escalating geopolitical uncertainty stemming from the ongoing war in Iran.

She stated: "With the conflict causing an energy supply shock that has dampened hopes for U.S. interest rate cuts, it is not surprising that gold has failed to perform its traditional role as a safe haven this time."

She explained that gold’s sensitivity to monetary policy has become the primary price driver at this stage, overshadowing its role as a traditional hedging tool against geopolitical risks and inflation.

She added: "Gold prices do not merely reflect the impact of a specific event; rather, they more significantly reflect the political and monetary response that follows such an event."

Morgan Stanley believes that rising oil prices and the resulting inflationary pressures are prompting the U.S. Federal Reserve to re-evaluate its monetary easing trajectory. This has already led markets to scale back bets on interest rate cuts during the current year.

Nevertheless, the bank still expects at least one interest rate cut this year, which could provide additional support for gold prices.

Gower noted: "Gold is likely to remain sensitive to movements in real yields, but we see room for further upside."

Morgan Stanley anticipates a rate cut in January, followed by another in March 2027.

She added: "This scenario would be supportive for gold, especially as purchasing decisions within Exchange-Traded Funds (ETFs) have become highly sensitive to monetary policy signals, and gold has begun to reconnect with real yield levels."

Gower pointed out that gold's future in the coming period will remain heavily tied to the trajectory of the conflict in the Middle East, particularly given the current market volatility.

U.S. President Donald Trump stated overnight that "significant progress" is being made toward a lasting peace agreement.

While analysts believe a swift end to the crisis could allow the global economy to recover from the current energy supply crunch, Gower warned that a prolonged conflict could increase the risks facing gold.

She stated: "Gold prices could face pressure if markets begin to anticipate interest rates remaining on hold for longer, or even the possibility of further hikes."

Conversely, she explained that gold's gains in the event of a political settlement might be relatively limited, as already high price levels could weaken demand from ETFs, central banks, and consumers.