Gold rally to slow next year

Morgan Stanley has projected that gold prices will post relatively smaller gains in 2026 as purchases by central banks and exchange-traded funds moderate, although anticipated interest rate cuts and a weaker US dollar are expected to keep the broader uptrend intact.

In its latest outlook, the investment bank forecast gold prices at around $4,800 per ounce by the fourth quarter, citing strong Chinese retail demand, continued, though selective, central bank buying, and global growth concerns as key supportive factors.

Commenting on the report, Adnan Agar, Director at Interactive Commodities, said the outlook reflects a natural slowdown in momentum after an extraordinary rally. He noted that gold prices have nearly doubled since the uptrend began in 2024, prompting many investors to book profits after achieving returns of 50% to 100%.

"On October 7, 2023, gold was trading near $1,800 an ounce. Today, prices are close to $4,300," he said, adding that while a correction of $500 to $600 was widely expected, it has yet to materialise. "The market has been rising almost continuously for more than two years."

According to Agar, elevated gold prices are pushing investors towards alternative metals. Silver has delivered higher percentage gains than gold, while copper and platinum are trading at or near record levels. Platinum, in particular, has surged by nearly $900 this year, rising from a range of $900-$1,000 until June to nearly $1,800, with the potential to test its all-time highs of $2,200-$2,300 in the coming months.

Morgan Stanley expects silver to underperform gold going forward, with 2025 likely to mark the peak of its supply deficit as solar installations decline in 2026. The bank forecasts platinum prices at $1,775 per ounce and palladium at $1,325 per ounce in 2026, reflecting differing demand dynamics and structural imbalances.

Despite signs that retail investors may be exiting the gold market, central banks remain a key source of support. Agar highlighted that the People's Bank of China has been accumulating gold for 12 to 13 consecutive months, even at elevated price levels, an unusual trend compared to historical patterns.

Looking ahead, Agar expects gold's rally to slow next year, with prices potentially peaking between $5,000 and $5,500 an ounce. A correction of $1,000 to $2,000, he said, would be considered normal given current valuations. Both gold and silver are technically overbought on monthly indicators, pointing to a likely consolidation phase lasting three to six months, during which major rallies may pause.

Furthermore, gold prices in Pakistan declined on Tuesday, moving against the trend in the international market, where bullion edged higher as investors assessed a US jobs report that showed a rise in unemployment, strengthening expectations of rate cuts by the Federal Reserve and weighing on the dollar.

In the local market, gold per tola fell by Rs4,000 to Rs450,862, according to the All-Pakistan Gems and Jewellers Sarafa Association. In the international market, spot gold rose 0.4% to $4,316.67 per ounce, while US gold futures climbed 0.3% to $4,347.10, Reuters reported.

Meanwhile, the Pakistani rupee edged up against the US dollar, closing at 280.30 compared with 280.31 a day earlier.