Morgan Stanley analysts have reassessed gold’s conventional safe-haven status after observing that the metal sits roughly 10% below pre-conflict levels while other asset classes have reclaimed earlier losses. The bank argues that gold is behaving as a hybrid - part safe haven, part risk asset and part alternative investment - rather than exclusively shelter capital in times of stress.
The firm highlights that gold registered a 90% correlation with the S&P 500 across the six months ending in January, underscoring the metal’s recent alignment with equity market moves. Morgan Stanley attributes some of gold’s relative underperformance to a prevailing supply shock, which it says has different implications for monetary policy than a demand shock.
Bond market dynamics are central to the discussion. The report notes that bond yields have only partly reverted to pre-conflict levels, which reduces the relative appeal of a non-yielding asset such as gold in investor portfolios. That dynamic, paired with physical selling from multiple sources, has weighed on prices.
On the physical flows side, Morgan Stanley documents a range of sellers. Turkey’s central bank sold 52 tonnes between February 27 and March 27 and arranged an additional 79 tonnes in gold swaps, according to the Financial Times. Other central bank purchases were muted in the first quarter even though central banks have been major buyers of gold since 2022. India’s government also delayed approvals for bullion imports, which the report interprets as an effort to alleviate currency pressure. Exchange-traded funds were active sellers in March, liquidating about 90 tonnes from the approximately 150 tonnes bought in January and February.
Despite those headwinds, Morgan Stanley identifies potential support for a recovery. ETFs have repurchased nearly half of the March sales, and there are signs that real yields are only partially corrected. Expectations for U.S. interest rates have shifted, with markets placing a greater probability on a rate cut rather than a hike by year-end, a move that could be supportive for gold. A weakening dollar is also cited as providing incremental support.
China’s holdings figure in the outlook as well. The People’s Bank of China reported its largest monthly rise in gold reserves since January 2025, with the pace of accumulation growing four to five times faster than in recent months, which Morgan Stanley views as evidence of purchasing during the price pullback. Taking these factors together, the bank forecasts gold reaching $5,200 per ounce in the second half of 2026.
Measured downside risks remain. The firm warns that a re-escalation of conflict could push bond yields higher, undermining gold’s appeal. In addition, a deterioration in equity markets could trigger safe-haven liquidation to meet margin calls, further pressuring prices.