Analysts at Morgan Stanley reached this conclusion in a new report on the precious metals market, according to Investing.com.
According to the bank, gold continues to receive strong support from global central banks, but this is not enough to trigger a new price surge. The key factor remains the return of large investors via ETFs, which, conversely, have seen capital outflows in recent months.
Why the Fed Is Hindering Gold’s Rise
Gold is traditionally considered a safe-haven asset, but it has one distinctive feature: the metal does not generate interest income. Therefore, when interest rates in the economy remain high, investors tend to choose bonds and other instruments with guaranteed returns. This is exactly what is happening in the U.S. market right now.
Following the Federal Reserve’s latest signals, market participants have begun to price in a longer period of high interest rates. Against this backdrop, the real yield on 10-year U.S. Treasury bonds (one of the key indicators for the gold market) has risen.
Rising yields make investments in gold less attractive, which has already led to an outflow of funds from gold ETFs.
Morgan Stanley believes that the U.S. central bank is not yet ready to ease monetary policy and may maintain its current course even if there are signs of a weakening labor market.
The Middle East Is Unexpectedly Helping the Market
The situation in the Middle East is having an additional impact on gold. At first glance, a reduction in geopolitical tensions should weaken demand for safe-haven assets. However, analysts note a more complex relationship.
During energy crises, rising oil prices fuel inflation and create problems for fuel-importing countries. Under such conditions, some central banks are forced to draw on their gold reserves to support their economies and budgets.
If tensions in the region continue to ease, oil prices may stabilize or decline. This would reduce pressure on the monetary policies of many countries and lessen the need to sell gold from reserves.
China continues to actively build up its reserves
Global central banks remain the main source of support for the market.
China’s activity is particularly notable. According to Morgan Stanley, the People’s Bank of China has sharply accelerated its purchases of the precious metal. From March through May 2026, the regulator purchased 23 metric tons of gold. By comparison, purchases over the previous twelve months totaled 19 metric tons.
This strategy reflects the desire of many countries to diversify their reserves and reduce their dependence on the dollar.
It is precisely this steady demand from the official sector that currently provides a kind of safety net for the gold market, even during periods of declining investment demand.
High Interest Rates Aren’t Always a Problem
Although it is commonly believed that interest rate hikes have a negative impact on gold, historical data is not so clear-cut. According to Morgan Stanley’s calculations, on average, one month after the Fed raised rates by 0.25 percentage points, gold prices rose by 0.84%. Following a similar rate cut, the increase was more pronounced—about 3.9%.
In some cases, gold continued to rise even during periods of Fed policy tightening. This happened in 2006, 2018, and 2023, when investors feared an economic slowdown, regulatory missteps, or problems in the banking sector.
Analysts now believe that demand from central banks alone may not be enough to reach the $5,200-per-ounce mark. For the rally to continue, major financial investors must return to the market via ETFs. This will only be possible if falling energy prices begin to ease inflationary pressures and convince markets that the Fed will eventually ease its policy.
For now, gold remains caught between two powerful forces: record demand from central banks and high interest rates in the U.S.
