Morgan Stanley stated that the linkage between gold and interest rates has shifted once again, and in the current macroeconomic environment, gold prices are outperforming the broader market.
The bank has named gold its top commodity pick, with a target price of $5,000 per ounce by the second quarter of 2027.
Morgan Stanley commodity strategist Amy Gower said that if one refers to the historical relationship between gold and real yields from March to July, gold prices should have fallen below $3,000; however, massive gold purchases by central banks and continuous inflows into gold ETFs have pushed gold prices firmly above $4,000.
Gower wrote in the report: "Gold's recent resilience demonstrates that structural demand is continually offsetting macroeconomic headwinds. Looking ahead, falling yields or declining oil prices would provide upward momentum for gold prices; but even if rising yields reflect intensifying fiscal risks, or rising oil prices trigger stagflation concerns, gold is still expected to maintain its defensive properties."
In terms of related investment vehicles, Sprott Physical Gold & Silver Trust (CEF) and Sprott Physical Gold Trust (PHYS) offer investors exposure to precious metals.
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