Morgan Stanley expects Gold to decline in coming months

UNITED STATES January 20 2015 2:45 PMTweet 
NEW YORK (Scrap Register): Despite the near 5% increase in gold prices last week, Morgan Stanley said they still expect prices to decrease over the coming years.

"Our base case price projection calls for progressively lower levels over the next two years. The combination of the oil price sell-off, which undermines inflation risk, USD strength and a market-wide expectation of rate hikes in the US, will weigh on the gold price," Morgan Stanley added.

However, they note that a risk of further uncertainty may help gold prices. "Key central banks are adopting an easing bias (China; Japan); European economic growth remains weak, including a deterioration in Germany's outlook; we highlight risk of inflation emerging in the US…Elsewhere, a further decline in the macroeconomic outlook for Russia could further undermine broader EU growth, in turn creating geopolitical risk," the firm added.

Morgan Stanley expects gold prices to decline in the coming months, forecasting an average gold price of $1,180 an ounce for the year.