Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
In a recent interview with Bloomberg, Morgan Stanley’s Amy Gower made the bullish case for gold reaching $3,400. The announcement comes on the heels of recent appreciation for the price of gold. The bank’s Metals & Mining Commodities Strategist points to the two primary variables driving gold’s rally: physical demand and macroeconomic pressures.
The Twin-Engine Rally
Physical Demand
The physical side of gold’s momentum kicked off in 2022 when central banks doubled their annual purchases. Over the past three years, governments have maintained this elevated demand, buying more than 1,000 tons each year.
The strong appetite for physical bullion extends to the institutional and retail sectors, with investment demand climbing 25% in 2024 alone. Gold exchange-traded funds (ETFs) represent the newest growth in gold demand as inflows pick up, especially in North America.
Macro Pressures
The most recent factor strengthening gold’s rise comes from the macro angle. Through 2024, the yellow metal broke with traditional indicators by notching new highs amid high-interest rates, strong equities, and resilient bonds–factors usually working against gold prices.
With the Federal Reserve ready to cut interest rates, albeit slower than initially expected, the macro climate is set to boost gold. Lower interest rates generally drive investors toward safe-haven assets as the opportunity cost of non-yielding instruments decreases.
A Dying Tailwind?
When pressed on the Fed’s wait-and-see stance, Gower stressed how the direction of the monetary shift matters more than the current level of rates. US fiscal policy is falling behind as other countries dive into quantitative easing. Trump’s whipsawing tariff policy and the resulting economic uncertainty are largely to blame for this delayed response, although Fed leaders anticipate two more rate cuts in 2025.
As long as markets believe the rate cycle is at its peak, gold becomes more attractive than interest-bearing assets. This is generally true even if cuts are pushed back. The Morgan Stanley strategist expressed optimism about gold’s future in the current easing cycle, noting that gold hasn’t peaked yet and the Fed is heading in the right direction. The investment bank sees the macro accelerating gold’s rise as long as the physical side holds the line.
The Bull Case for $3,400
“This move higher in gold has been building for quite some time,” Gower said, underscoring the yellow metal’s sustained momentum. Morgan Stanley places its bullish case forecast at $3,400 as prices already eclipse the bank’s base case scenario.
The investment bank joins a growing number of experts increasing their 2025 gold price predictions as the metal’s rally picks up momentum.