Source: Wall Street See
According to Morgan Stanley, ETFs may become the new driving force behind the next round of gold price increases. Gold ETFs have started to increase their holdings since late May, and COMEX's net long position is at its highest since Q2 2022.
Under the market's expectations of a rate cut and the strong support of the "Trump trade", the gold price reached a historic high of $2470/ounce this week. Now the market is concerned whether the gold price can climb to new heights? Are there any new bullish factors?
Morgan Stanley shouts out: yes, there are!
According to the latest research report by Morgan Stanley on July 18th, the demand for physical gold from central banks and markets is the key factor driving the strength of gold prices. And the latest situation is that the financial market's support for gold prices is gradually showing, and the gold ETF positions have been increasing since late May, and the COMEX net long positions have reached their highest level since the second quarter of 2022.
Therefore, Morgan Stanley believes that under the background of the interest rate cut boosting gold prices, it is expected that the gold price will rise to $2650/ounce in the fourth quarter, reaching a historical high.
ETF may become the "new momentum" for the next round of gold price increases.
According to Morgan Stanley, there have been continuous net purchases of gold ETFs since late May, against the background of the ECB's first interest rate cut in five years in June, which strengthened the market's optimistic expectations for the Fed's follow-up rate cut, COMEX net long positions have risen slightly, hitting their highest level since the second quarter of 2022.
Specifically, in the past few months, the net purchases of gold ETFs have mainly been driven by the European and Asian markets, taking into account the fact that the central bank's interest rate cut cycle has already started. Although the North American region still tends to have outflows of funds, Morgan Stanley believes that this trend will also change after the Fed's interest rate cut, as has been verified in the interest rate cut cycles of 2020 and 2019.
Morgan Stanley also emphasized that the recent inflow of funds into gold ETFs is due to the growing concern in the market about a U.S. economic recession, but it is believed that the United States still has the potential for a soft landing. If the data continues to show weakness, the Fed may take more aggressive measures.
But at the same time, Morgan Stanley also mentioned that the financial market's support for gold prices has so far been limited. Since mid-2022, even though gold prices have risen, gold ETF positions have continued to decline, which is a very unusual phenomenon in history.
And although COMEX net long positions have risen from their lows to 0.25 million contracts, there is still some distance from the historical high of 0.35 million contracts in 2020. This is because gold is difficult to compete with in investment portfolios when interest rates are high.
Editor / jayden