Gold prices have been climbing fast in 2026. Morgan Stanley says the metal already hit its fourth-quarter price target of $4,450 per ounce ahead of schedule, and the bank now sees a path to above $5,000 by 2027.
Analyst Amy Gower wrote in a note that while the direction is upward, investors should expect volatility along the way.
A surprise announcement from the U.S. Treasury gave gold a sharp lift this week. Treasury Secretary Scott Bessent said the department would double the size of some liquidity-support operations tied to longer-dated government debt.
That pushed long-dated Treasury yields lower. When yields fall, gold becomes more attractive because the cost of holding a non-yielding asset like gold goes down.
The U.S. dollar also weakened, hovering near a three-month low. A softer dollar tends to support gold prices because it makes the metal cheaper for buyers using other currencies.
Spot gold hit its highest level since June 2 before pulling back. By early Thursday, spot gold had dropped about 0.8% to $4,487 per ounce as investors took profits. Gold futures were broadly flat at $4,544 per ounce.
Central bank demand has been a steady force behind gold prices. Morgan Stanley said China has added 60 tons of gold so far this year, its most since 2023. Poland has added 82 tons, bringing its total holdings to 632 tons as it works toward a 700-ton target.
The bank said central banks have been using softer price dips to build reserves, a pattern that has helped put a floor under prices.
On the demand side, exchange-traded fund inflows have also picked up. After 93 tons of outflows in May and June, ETFs added 70 tons in July and August. Morgan Stanley linked the reversal to a lower implied probability of Federal Reserve rate hikes.
Morgan Stanley’s economists expect the Fed to stay on hold through all of 2026. Fed minutes released this week showed inflation remains a concern, with many officials open to raising rates if price pressures do not ease toward the 2% target.
Markets are pricing a one-in-three chance of a rate hike at the September meeting, according to CME FedWatch.
U.S. debt has now crossed $40 trillion for the first time, adding to concerns about the country’s fiscal position. Morgan Stanley noted gold has started to decouple from real yields, rising even when long-dated yields stayed flat, which the bank said reflects fiscal worries more than yield levels alone.
Risks remain. Upcoming U.S. inflation data could shift rate expectations, and short positions on gold at COMEX are near their lowest since April 2020, leaving less room for short covering to push prices higher.
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