Investing.com — Morgan Stanley analysts are questioning ’s traditional safe-haven role after the metal remained 10% below pre-conflict levels while other asset classes fully recovered.
The investment bank suggested gold may function as a mix of safe haven, risk asset, and alternative investment, noting its 90% correlation with the S&P 500 during the six months ending in January. The firm attributed gold’s underperformance to the current supply shock affecting global markets, which carries different monetary policy implications than a demand shock.
Bond yields have only partially returned to pre-conflict levels, making non-yielding gold less attractive in investor portfolios, according to the report.
Physical gold selling has emerged from multiple sources. Turkey’s central bank sold 52 tonnes between February 27 and March 27, according to the Financial Times, while arranging 79 tonnes in gold swaps. Other central bank purchases during the first quarter were subdued, despite central banks being major gold buyers since 2022.
India’s government delayed bullion import approvals, likely attempting to reduce currency pressure. Exchange-traded funds liquidated approximately 90 tonnes in March of the 150 tonnes purchased in January and February.
However, Morgan Stanley sees room for recovery. ETFs have repurchased nearly half of March’s sales, even as real yields remain partially corrected. US interest rate expectations have shifted back toward pricing higher chances of a rate cut than a hike by year-end.
China’s central bank reported its largest monthly gold reserve increase since January 2025, growing four to five times faster than recent months, suggesting buying during the price pullback. A weakening dollar is providing additional support.
Morgan Stanley expects gold prices to reach $5,200 per ounce in the second half of 2026. Downside risks include conflict re-escalation pushing bond yields higher and potential safe-haven liquidation to meet margin calls if equity markets decline.
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