Morgan Stanley Sticks to Bullish Gold Call Amid Market Volatility

Morgan Stanley is sticking to its bullish gold call despite the metal's recent decline. The bank's metals and mining strategy team, led by Amy Gower, believes that robust physical demand, fiscal anxiety, and potential pullbacks in oil prices could put a floor under bullion.

Gower pointed out three factors supporting gold prices: persistent appetite for physical metal, particularly among central banks; the fiscal backdrop, with investors remaining unnerved by long-term public debt and government finances; and energy dynamics, including potential de-escalation of the Middle East conflict and a subsequent drop in oil prices.

The World Gold Council's data shows China leading the way in central bank gold purchases, with 20 tons in July alone. Chinese gold imports have exceeded 1,000 metric tons this year, putting the country on track for its strongest year since at least 2017.

Gower acknowledged that elevated bond yields are a headwind for gold but suggested that policymakers' intervention or shifting inflation expectations could change the calculus quickly.