Next Leg of Gold's Rally to be More Challenging, Says Morgan Stanley

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After a blistering rally that took gold to all-time highs above $3,000 per ounce, Morgan Stanley is signalling a more tempered outlook for the yellow metal’s ascent.

While the investment bank maintains a constructive view on gold fundamentals, its latest research suggests that the next phase of gains will be harder won.

"Gold is sitting close to all-time highs, just above $3,000/oz at the time of writing, a 15% increase year-to-date after rising 27% in 2024," wrote Amy Gower, commodities strategist at Morgan Stanley. "We continue to think the gold price has not yet peaked, but the next leg higher may come more slowly."

Demand Still Robust, But Cracks Emerging

The report points to persistent strength in physical demand, especially from central banks and retail investors. Central banks bought over 1,000 tonnes of gold for a third straight year in 2024, and global gold ETFs have registered their largest two-month inflow since Q2 2022. Notably, Chinese gold ETFs posted record volumes in February.

Yet Morgan Stanley notes signs of demand fatigue in key consumer markets. "India’s imports more than halved from their Q4 run rate in January and February despite the wedding season," Gower wrote. "In China, February SGE gold withdrawals were -29% YoY as lower jewellery demand offset strong investment."

Read: Looming tariffs are a compelling reason to build exposure to gold says Citi.

Investor sentiment is also moderating. COMEX long positions have declined to 257,000 contracts from over 300,000 in mid-February. “This has become an increasingly important explainer of price,” Gower added.

Morgan Stanley flags demand destruction, particularly in the jewellery segment, as the biggest risk to further upside. "Jewellery demand is showing signs of slowing, and may need some price stabilisation to return," the report notes.

While macro factors such as falling real yields and a weaker dollar remain supportive, analysts caution that the easy gains may already be behind us. "The move from $2,500 to $3,000/oz was the fastest move to a major milestone on record," Gower emphasised. "It’s reasonable to expect a period of consolidation."

Outlook and Forecasts

Morgan Stanley projects gold to average $2,763/oz in 2025, before gradually retreating to $2,150/oz by 2030, according to its long-term nominal forecast. The bank maintains a bullish stance in the short term, supported by structural central bank demand and geopolitical risk.

"Uncertainty tends to support demand for ‘safe haven’ gold, whether that’s around global growth, tariffs or geopolitics," Gower wrote.