Morgan Stanley Bullish on Gold: Year-End Target Price $5200, Expects At Least One Rate Cut This Year

Gold prices have regained strength amid recent volatility, currently fluctuating at the critical resistance zone of $4,700 per ounce. Although prices have yet to firmly reclaim higher levels, Morgan Stanley believes the upward trend remains intact and maintains a higher target projection.

Amy Gower, Metals & Mining Commodities Strategist at Morgan Stanley Research, pointed out in the latest precious metals report that gold prices are expected to reach approximately $5,200/oz by the end of this year, which represents about 10% upside from current levels.

She emphasized that the recent Middle East situation, especially Iran-related conflicts, is not the sole variable determining gold’s price action. Gower stated: "This conflict triggered an energy supply shock, which reduced market expectations for lower US interest rates, so it is unsurprising that gold has struggled to play a safe-haven role this time."

In her view, the core factors driving gold prices have shifted. She noted: "Gold's sensitivity to monetary policy has now replaced other elements as the primary price driver. This has dimmed its safe-haven status and weakened its effectiveness as a hedge against geopolitical and inflationary risks."

The upward pressure on energy prices is impacting the Federal Reserve’s policy path. As a result, the market has adjusted rate-cut expectations; however, Morgan Stanley still anticipates at least one rate cut this year, and this outlook will provide support for gold prices.

Regarding the future rates path, the bank further expects a rate cut in January 2027, followed by another in March 2027. Gower commented:

"Gold will likely remain sensitive to real yields, but we believe there is still more upside potential."

She also pointed out that the influence of policy signals on capital flows is increasing. "This should be favorable to gold, as exchange-traded funds’ purchase decisions are particularly sensitive to policy signals, and gold is now realigning with real yields," Gower said.

Nevertheless, geopolitical developments will continue to significantly impact short-term performance. US President Trump recently claimed "major progress" in the pursuit of a lasting peace agreement. The market generally believes that if tensions ease, the global economy could gradually shake off the pressures from the energy shock.

However, Gower reminds that the longer the conflict persists, the greater the uncertainty facing gold. "If the market starts to expect rates to remain unchanged for a long time or even rise, gold prices could come under pressure," she noted.

In another scenario, where tensions ease rapidly, high gold prices themselves could suppress demand. She pointed out that when prices are already at elevated levels, willingness to buy from exchange-traded funds, central banks, or end consumers may all be limited, which could cap further upside potential.