Morgan Stanley has raised its gold price forecast, projecting the metal could exceed $5,000 per ounce by 2027, though it anticipates a volatile path to that level.
The bank’s fourth-quarter target of $4,450 per ounce was reached earlier than expected, according to analyst Amy Gower. The upward revision follows a shift in exchange-traded fund (ETF) demand, with 70 metric tons added in July and August after 93 tons of outflows in May and June. The rebound in ETF flows coincides with a reduced implied probability of Federal Reserve interest rate hikes, which has supported investor appetite for gold.
Central bank purchases remain a key driver of the market. China has added 60 tons to its reserves so far in 2024, the most since 2023, while Poland increased holdings by 82 tons, bringing its total to 632 tons and approaching a 700-ton target. Analysts note that central banks have taken advantage of softer prices to expand their gold reserves.
Gold’s recent performance has shown signs of decoupling from long-term real yields, rising in early August despite stable long-dated yields. The metal appears to be reacting to fiscal concerns rather than yield levels, with additional support coming from reports of an expanded U.S. Treasury buyback plan. However, risks remain, particularly around upcoming U.S. inflation data.
On positioning, the COMEX short position is near its lowest level since April 2020, limiting potential for further short covering. Morgan Stanley’s economists expect the Federal Reserve to maintain its policy rate through 2026, a stance that could continue to underpin gold’s appeal as a non-yielding asset in a low-rate environment.
