Is the key to the rise and fall of gold in the hands of the Federal Reserve? Morgan Stanley: Gold is expected to rise to $5200 by the end of the year, with another rate cut!

Although the ongoing US-Iran conflict continues to bring geopolitical uncertainty, gold has not shown its traditional safe-haven asset attributes. However, the gold market seems to be gaining momentum recently, with prices testing a new resistance level of $4,700 per ounce. Currently, the price of gold is still far below the peak of nearly $5,600 reached at the end of January. However, a major Wall Street bank predicts that gold prices will continue to rise this year, "sprinting" to $5,200 per ounce. This means that gold prices could rise by about 10% from current levels. Amy Gower, a strategist for metals and mining commodities at Morgan Stanley Research, pointed out in a recent report that the core driver of gold has shifted from safe-haven demand to the Federal Reserve's monetary policy and real yield trends. The bank maintains its forecast of gold prices reaching $5,200 per ounce by year-end and believes that renewed expectations of rate cuts will provide further upside for gold. Gower mentioned that despite the escalating conflict in Iran intensifying geopolitical uncertainty, gold prices have not been performing well in recent months, which she finds unsurprising. She explained in her report, "The conflict caused energy supply shocks, reducing hopes of rate cuts by the Federal Reserve, so it is not surprising that gold has failed to act as a safe haven this time." "The sensitivity of gold to monetary policy has become the main driver of its price. This obscures its safe haven status and reduces its effectiveness in hedging geopolitical and inflation risks. Gold prices not only reflect the impact of specific events, but more importantly, they also reflect subsequent policy responses," she added. After the outbreak of the US-Iran war, high oil prices increased inflation pressure, forcing the Federal Reserve to reassess its accommodative policy stance. As a result, the market has almost completely ruled out the possibility of rate cuts this year. However, Morgan Stanley still bets on at least one rate cut this year, which they believe will support the rise in gold prices. "Gold prices may still remain sensitive to real yields, but we believe there is still room for upside," the report states. Gower further pointed out that the Federal Reserve is expected to cut interest rates again in January and March 2027, respectively. "This should be beneficial for gold, as ETF purchase decisions are particularly sensitive to policy signals, and gold is now re-linking with the trend of real interest rates," she added. Looking at the current market volatility, the future trend of gold largely depends on the direction of the Middle East conflict. Last night, US President Trump stated that the US and Iran have had "very productive" discussions in the past 24 hours, and it is "very likely" that an agreement will eventually be reached. When asked about the specific timeline for reaching an agreement, Trump estimated "within a week." Analysts say that if the crisis is resolved quickly, the global economy should be able to recover from the current energy supply crisis. However, Gower warns that the longer the conflict lasts, the greater the risks for gold. "If the market begins to anticipate that interest rates will remain unchanged or even increase in the long term, gold prices may be affected," she wrote. "At the same time, in the case of a solution, the upside for gold prices may be limited, as already high prices may dampen demand from ETFs, central banks, and consumers." This article was republished from "Cailianshe." Editor: Jiang Yuanhua.