According to "Economic Times," Morgan Stanley has significantly lowered its gold price forecasts, believing that the recent sharp decline in gold is not a coincidence.

The bank has reduced its target price for gold in the second half of 2026 to $5,200 per ounce, which is substantially lower than the previous forecast of $5,700, representing a notable decrease. Earlier, gold experienced a six-week mass sell-off with an overall decline of nearly 8%, severely undermining global investor confidence. Currently, the main question is clear: has the bullish trend in gold ended, or is this a temporary correction before a new rise?

The answer is not so simple. According to Morgan Stanley's latest forecasts, the current drop in gold prices is caused by a rare supply shock; simultaneously, the rise in real interest rates and the postponement of the Fed's rate cuts have completely changed the macroeconomic picture. Usually, gold rises when rates fall, but now the prolonged increase in rates has disrupted traditional pricing logic, prompting investors to reconsider their portfolios.

This change is especially significant because gold is not just an ordinary commodity but a macroeconomic indicator reflecting inflation expectations, central bank actions, and global uncertainty.

Morgan Stanley's revised forecast shows that in 2026, gold movements will depend less on "safe haven" factors and more on market liquidity, bond yields, and the pace of Fed policy. Gold volatility will now depend on economic data rather than market sentiment.

Why has the target price for gold been lowered?
The report notes that the reason for lowering the gold price target is quite clear: it is not about a collapse in demand but about a supply shock. The surge in oil prices due to instability in the Middle East region quickly increased global inflation expectations; amid ongoing economic resilience, inflation growth is stimulating an increase in real rates.

As a result, the situation has changed: high real rates make bonds more attractive, and gold, which does not generate income, loses its appeal. Morgan Stanley emphasizes that gold is returning to its classic negative correlation with real rates — during the significant gold rally in 2025, this relationship was weakened, but now it is strengthening again.

At the same time, actions by central banks are also putting downward pressure on gold prices. Central banks of countries like Turkey and other emerging markets have begun selling their gold reserves, further reducing the price. Additionally, investments in gold ETFs have shifted to net outflows: investors who previously bought gold en masse are quickly leaving the market, accelerating the price decline.