Morgan Stanley: Real Yields Surge, Gold Price Holds $4,000, Supported by Central Bank and ETF Buying

according to Chaoxiang Research, a Morgan Stanley research note dated October 26, 2026, states that gold prices have declined only 10% from their August high and remain slightly above $4,000 per ounce. Based on the real yield dynamic from March to July 2026, gold should trade below $3,000 per ounce, reflecting a 28% discrepancy. Annualized central bank purchases in Q2 2026 reached 1,155 tons.

Morgan Stanley assesses that the surge in real yields has not crushed gold prices; the valuation divergence stems from structural demand such as central bank purchases and ETF inflows, with global gold ETF inflows hitting a record $31 billion in Q3. Gold's hedging function against equities has been ineffective since 2020, though it still provides a buffer during the worst weekly selloffs in bonds. Morgan Stanley maintains gold as its preferred metal, setting a price target of $5,000 per ounce for Q2 2027. Risks include further Federal Reserve tightening, a stronger US dollar, and central bank gold sales.