Synopsis:

Morgan Stanley maintains a bullish outlook on gold, but warns that the next leg higher may be slower and more complex, as rising prices are starting to weigh on physical demand, particularly from major consumers like India and China. Investment demand remains firm, but a cooling in speculative positioning and softer jewellery demand could moderate upside momentum.

Key Points:

1️⃣ Gold Has Rallied Rapidly to $3,000/oz ⚡️

• The move from $2,500 to $3,000 was the fastest milestone climb on record, per WGC.

• This rapid appreciation may now be dampening physical demand.

2️⃣ Jewellery Demand Softening in Key Markets 💍📉

• India’s gold imports more than halved in Jan–Feb from Q4 levels despite the wedding season.

• In China, SGE withdrawals were -29% YoY in February, as jewellery demand faltered, offsetting strong investor interest.

3️⃣ Speculative Positioning Eases 📊

• COMEX long positions have fallen to 257k lots, down from over 300k in mid-February.

• This shift in positioning has become a key influence on near-term price action.

4️⃣ Investment & Central Bank Demand Still Solid 🏦

• Despite softening in consumer demand, ETF flows and central bank buying remain supportive, forming a strong base for gold.

Conclusion:

Morgan Stanley believes gold has further upside, but warns that momentum is slowing after an exceptionally rapid surge. With jewellery demand weakening and speculative positions unwinding, the next leg of the rally will be more measured, though robust investment and central bank flows continue to underpin the longer-term bullish view.