Oct 31 (Reuters) - Morgan Stanley said on Friday that gold prices had potential to climb to $4,500 per ounce by mid-2026, citing strong physical demand by exchange-traded funds and central banks as the economic outlook remains uncertain.
"Recent price action took gold well into 'overbought' territory on an RSI (Relative Strength Index) basis, but the recent correction has taken it to a healthier level, likely cleaning up positioning," Morgan Stanley said in a note.
The bank expects continued buying of gold-backed exchange-traded funds (ETFs) as interest rates decline, alongside steady purchases by central banks, albeit at a slower pace and stabilization in jewelry demand.
However, Morgan Stanley cautioned that downside risks remain, including potential price volatility that could prompt investors to shift toward other asset classes or decisions by central banks to reduce gold reserves.
Gold prices have surged over 54% year-to-date, hitting multiple record highs in 2025, including the latest peak of $4,381.21 per ounce on October 20, but have retreated more than 8% since then.
The rally in gold this year has been fueled by geopolitical uncertainty, expectations of rate cuts, central bank purchases, and strong gold-backed ETF inflows.
Reporting by Anmol Choubey in Bengaluru; Editing by Emelia Sithole-Matarise
