Gold Prices May Rebound Amid Central Bank Demand, Debt Concerns

Morgan Stanley's metals and mining strategist Amy Gower believes that despite gold's recent decline, there are several factors that could support its price rebound. Gold prices have fallen by 10% in the past six months due to rising Treasury yields and expectations of Federal Reserve interest rate hikes.

Gower points out that persistent demand from central banks and China remains strong. In July, central banks reported net purchases of 23 metric tons of gold, while China added 20 tons. Poland purchased 8 tons that month, making it the second-largest buyer after China. Chinese gold ETFs also recorded inflows of about $744 million in July.

Gower suggests that growing concerns over government debt and fiscal sustainability could also support a comeback for gold. If stress in long-dated bond markets prompts policy intervention or sends yields lower, investors may turn back to gold as a safe-haven asset. Additionally, if inflation pressures ease due to falling oil prices, it could reduce pressure on the Fed to raise interest rates.

Morgan Stanley sees $4,000 an ounce as a 'quite strong floor' for gold. Gower believes that gold is still a valuable investment option despite its recent decline. The precious metal faces significant volatility in the final quarter of 2026 due to upcoming Fed meetings, inflation reports, and economic data.