Does a Morgan Stanley strategist see 3 key reasons to hold the precious metal, regardless of the pullback?

“Gold’s recent slide may not be enough to undermine the longer-term case for holding the precious metal, according to Morgan Stanley, which sees resilient physical demand and concerns over government finances providing structural support for bullion. Amy Gower, head of metals and mining strategy at Morgan Stanley, highlighted three factors which could help underpin prices over the coming months, despite gold sliding towards a seven-week low earlier this week. Gold futures edged higher on Wednesday to $4,212.60, a 0.77% advance, while spot gold was flat at $4,180.78. The move comes after bullion fell sharply during Monday’s session amid concerns that rising bond yields could dampen appetite for non-interesting-bearing assets, like precious metals. The precious metal has fallen roughly 10% over the last six months. Physical demand for gold remains strong, particularly among central banks, which bought a net 23 metric tons during July, according to World Gold Council data published earlier this month. Gower pointed specifically to China and Poland, which purchased 20 metric tons and 8 tons of gold, respectively, during July. She told CNBC’s “Squawk Box Europe” on Tuesday that Chinese imports of gold broadly are on track to be the highest since 2017. “China seems to have this very strong appetite for gold,” she said. @GC.1 YTD mountain Gold futures. China’s total gold imports, which also reflect private and institutional demand, exceeded 1,000 metric tons during the first eight months of the year, the WGC said. Secondly, as markets remain gripped by concerns around long-term public debt and fiscal sustainability globally, Gower acknowledged that higher bond yields remain a challenge for non-yielding assets like gold. However, while traders’ expectations of fresh Federal Reserve rate hikes are growing, Gower indicated that any further policy intervention or changing market expectation over inflation could move in gold’s favor. “What if we get more intervention in that long-dated bond market and then you get yields coming back down?” Gower said. Meanwhile, as U.S. and Iranian officials reportedly hold separate talks with mediators with a view to resolving the seven-month conflict in the Middle East, a rapid de-escalation could help pull oil prices lower. Kpler data shows Middle Eastern crude exports rebounding this month to their highest level since the war began. any easing of inflation expectations could help contain upward pressure on interest rates and bond yields, in turn boosting gold prices. “What happens if oil comes down?” Gower said. Heading into the final quarter of 2026, Gower said she favors gold on a 12-month view, acknowledging the potential for volatility in the asset against an uncertain economic backdrop of more Federal Reserve meetings and data releases. “There are still lots of reasons to have gold,” she said. “We see $4,000 as quite a strong floor.” “