Morgan Stanley: Gold is expected to break through $3,800 per ounce by the end of the year
2025-09-12 00:00:48
Amy Gower, metals and mining commodity strategist at Morgan Stanley, said that gold is more than just a safe-haven asset, and its price trends are also revealing to investors the current state of the global economy and financial markets.
Gao Hua pointed out that "gold has always been the asset of choice in times of uncertainty, but in 2025, its role is evolving. Investors pay attention to gold not only because it can hedge against inflation, but also because it is seen as a 'barometer' reflecting a variety of issues, from central bank policies to geopolitical risks. When the price of gold changes, it often means that major events are happening beneath the surface."
Since the beginning of this year, gold prices have risen by more than 38%, and silver has risen by more than 42% - it is clear that major changes have occurred. Gao Hua listed several key factors driving this rise:
"First, central banks are expected to usher in another year of large-scale gold purchases. Gold now accounts for a larger proportion of central bank foreign exchange reserves than U.S. Treasury bonds, a first since 1996," she emphasized. "This fully demonstrates the market's confidence in the long-term value of gold. In addition, in August alone, gold ETFs (exchange-traded funds) saw inflows of US$5 billion, and the cumulative inflows so far this year have set a new record high outside of 2020, which also shows that institutional investors' interest in gold has rebounded."
She added: "Despite being a non-yielding asset, gold's appeal remains surprisingly strong with inflation still above target in many major economies. Furthermore, investors believe central banks may soon have to cut interest rates, which could further boost gold prices."
Gao Hua said that Morgan Stanley predicts that the price of gold will still have room to rise by about 5% in 2025, and it is expected that the price of this precious metal will exceed US$3,800 per ounce by the end of the year.
She cautioned, “But there is an important variable to consider. Although precious metals, especially gold, are primarily viewed as a hedge and safe haven during times of macroeconomic uncertainty, jewelry demand still accounts for a large share of the overall precious metals market – 40% of gold demand and 34% of silver demand comes from the jewelry industry. And the direction of jewelry demand remains uncertain.”
Gao Hua said that jewelry demand for precious metals has shown signs of weakness: "As consumers reacted to high prices, gold jewelry demand fell in the second quarter of this year to its lowest level since the third quarter of 2020. Despite this, gold still maintained its gains from January to April, while silver prices continued to rise steadily, supported by strong demand from the solar industry."
Although gold and silver have lacked catalysts for further gains in the past few months, both are expected to benefit from the Federal Reserve's expected rate cuts. "Our economists expect the Fed to announce a rate cut at its September meeting, which would be the first rate cut since December 2024," Gao Hua said. "Looking back at data from the 1990s, within 60 days of the Fed starting a rate cut cycle, gold and silver prices rose by an average of 6% and 4%, respectively - as falling yields significantly increased the competitiveness of non-yielding assets."
Morgan Stanley's currency strategists also predict that the US dollar will weaken further, which will make gold cheaper for investors in other global markets. "India's gold and silver imports showed signs of improvement in July," she noted. "India also plans to reform the Goods and Services Tax (GST), which may unleash purchasing power for gold and silver ahead of the festival and wedding season."
(Source of spot gold 30-minute chart: Yihuitong)
Gao Hua said, "Gold tends to outperform after the Fed cuts interest rates, so we still prefer gold to silver, but we are optimistic about the prospects of both metals."
This morning (September 11) local time, the Consumer Price Index (CPI) data released by the United States was higher than expected. The spot gold price immediately surged in the short term, but then fell back to the middle of the day's fluctuation range.
At 23:54 Beijing time, spot gold was trading at $3,632.47 per ounce, down 0.22% on the day, while spot silver was trading at $41.452 per ounce, up 0.78% on the day.
Gao Hua pointed out that "gold has always been the asset of choice in times of uncertainty, but in 2025, its role is evolving. Investors pay attention to gold not only because it can hedge against inflation, but also because it is seen as a 'barometer' reflecting a variety of issues, from central bank policies to geopolitical risks. When the price of gold changes, it often means that major events are happening beneath the surface."
Since the beginning of this year, gold prices have risen by more than 38%, and silver has risen by more than 42% - it is clear that major changes have occurred. Gao Hua listed several key factors driving this rise:
"First, central banks are expected to usher in another year of large-scale gold purchases. Gold now accounts for a larger proportion of central bank foreign exchange reserves than U.S. Treasury bonds, a first since 1996," she emphasized. "This fully demonstrates the market's confidence in the long-term value of gold. In addition, in August alone, gold ETFs (exchange-traded funds) saw inflows of US$5 billion, and the cumulative inflows so far this year have set a new record high outside of 2020, which also shows that institutional investors' interest in gold has rebounded."
She added: "Despite being a non-yielding asset, gold's appeal remains surprisingly strong with inflation still above target in many major economies. Furthermore, investors believe central banks may soon have to cut interest rates, which could further boost gold prices."
Gao Hua said that Morgan Stanley predicts that the price of gold will still have room to rise by about 5% in 2025, and it is expected that the price of this precious metal will exceed US$3,800 per ounce by the end of the year.
She cautioned, “But there is an important variable to consider. Although precious metals, especially gold, are primarily viewed as a hedge and safe haven during times of macroeconomic uncertainty, jewelry demand still accounts for a large share of the overall precious metals market – 40% of gold demand and 34% of silver demand comes from the jewelry industry. And the direction of jewelry demand remains uncertain.”
Gao Hua said that jewelry demand for precious metals has shown signs of weakness: "As consumers reacted to high prices, gold jewelry demand fell in the second quarter of this year to its lowest level since the third quarter of 2020. Despite this, gold still maintained its gains from January to April, while silver prices continued to rise steadily, supported by strong demand from the solar industry."
Although gold and silver have lacked catalysts for further gains in the past few months, both are expected to benefit from the Federal Reserve's expected rate cuts. "Our economists expect the Fed to announce a rate cut at its September meeting, which would be the first rate cut since December 2024," Gao Hua said. "Looking back at data from the 1990s, within 60 days of the Fed starting a rate cut cycle, gold and silver prices rose by an average of 6% and 4%, respectively - as falling yields significantly increased the competitiveness of non-yielding assets."
Morgan Stanley's currency strategists also predict that the US dollar will weaken further, which will make gold cheaper for investors in other global markets. "India's gold and silver imports showed signs of improvement in July," she noted. "India also plans to reform the Goods and Services Tax (GST), which may unleash purchasing power for gold and silver ahead of the festival and wedding season."
(Source of spot gold 30-minute chart: Yihuitong)
Gao Hua said, "Gold tends to outperform after the Fed cuts interest rates, so we still prefer gold to silver, but we are optimistic about the prospects of both metals."
This morning (September 11) local time, the Consumer Price Index (CPI) data released by the United States was higher than expected. The spot gold price immediately surged in the short term, but then fell back to the middle of the day's fluctuation range.
At 23:54 Beijing time, spot gold was trading at $3,632.47 per ounce, down 0.22% on the day, while spot silver was trading at $41.452 per ounce, up 0.78% on the day.
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