Gold Surges Past $5,000: Morgan Stanley Predicts Record Highs

Gold has achieved its fourth-quarter price target of $4,450 per ounce sooner than anticipated. Morgan Stanley analysts foresee the precious metal potentially surpassing $5,000 per ounce by 2027, although they caution that the journey may involve significant volatility.

The easing of expected Federal Reserve interest rate hikes has reignited demand for gold-backed exchange-traded funds. In July and August, these funds saw additions totaling 70 metric tons, following outflows in the preceding two months. Economists at the bank anticipate the Fed will maintain its current interest rate policy through 2026.

Furthermore, central banks have been leveraging softer prices to expand their gold reserves. China has added 60 metric tons this year, marking its largest accumulation since 2023. Poland also significantly increased its holdings by 82 tons, bringing its total to 632 tons and moving closer to its 700-ton target.

Recently, gold has started to diverge from its historical correlation with long-term real yields. It rose in early August even as long-dated yields remained stable. This decoupling suggests the market is pricing in the fiscal concerns driving higher yields rather than the yield levels themselves. Reports of an accelerated Treasury buyback plan are also providing additional support for gold prices.