Morgan Stanley says that investors should consider right now to be a buying opportunity for gold. It characterises gold as being incredibly resilient and says that any decline in rates should trigger a move to buy.
Morgan Stanley Wealth Management’s Chief Investment Officer, Lisa Shalett indicated that gold remains a safe store of wealth and has provided certainty and a safe harbour during a period of uncertainty in a briefing note to Morgan Stanley clients.
Shalett also highlighted just why gold is performing as it is, explaining, “Like equities, which have continued to shrug off the negative implications of rising real rates, gold, which moves inversely to real rates and in turn to the U.S. dollar DXY, has remained extremely resilient. Regarding the intermediate outlook, we are buyers of gold on weakness or declines in rates.”
In real terms, rates are now at the highest since 2008 Shalett concedes. However, this doesn’t tell the full story and Shalett says that one reason gold has been able to remain strong is because the increase is purely technical and could therefore, be temporary.
Shalett also highlights several other key factors which make gold such an attractive prospect – and could push prices higher. “Upside surprises on growth, inflation progress and earnings resilience have rewarded bulls in 2023,” she noted.
Crucially, she outlines gold as, “holding up as an alternative currency at a time when the dollar is vulnerable to debasement from inflation and ballooning deficit-financed spending.” This is a key observation as dollar debasement and deficit spending are long-term trends and could therefore serve as longer term support structures for gold prices.
Keep in mind, most analysts already expect gold to reach record highs by December.
Should the dollar continue to fall out of favour as the world’s reserve currency as more trading blocs such as the expanding BRICS (the alliance of Brazil, Russia, India, China and South Africa) look towards alternatives, and US government spending continues to soar, we can expect to see gold prices reach stratospheric new levels.
Don’t wait for prices to increase. Heed Morgan Stanley’s advice and consider this an opportune time to buy.
