Morgan Stanley are bearish on gold despite the inflation outlook

New York (Feb 16)  Morgan Stanley's Chief Cross-Asset Strategist Andrew Sheets has said believes that inflation will rise, but that the gold price will fall. He said:

“Morgan Stanley's economists forecast US inflation to rise a little over 2% over the next two years. So this is hardly the runaway type of scenario for inflation that gold would seem best suited for.”.

“Gold is an asset where the narrative matters. In 2021, the pandemic looks set to get better. Economic data is improving. Politics have become calmer. And interest rates are starting to rise.”

“Gold scores poorly on the more quantitative, cross-asset approaches that my team runs. The yield on gold is low, especially relative to other commodities. Its valuation isn't particularly attractive. The price momentum is poor, which is to say that commodities that are falling often tend to keep falling. And current economic data, which is improving, has often meant gold underperforms other assets.”.

“As for gold, we forecast a price a little under $1,800/oz. by year-end; implying further declines from current levels even as inflation rises.”.

Gold has moved 0.20% higher on Tuesday but the daily chart is still making lower highs and lower lows. The next support level is at the consolidation low near $1764/oz. If the yellow metal is to move to the upside then the purple horizontal resistance level at $1848/oz is next up and then the top of the channel and yellow resistance at $1959/oz. The chart is still a bearish one but the bulls keep stepping in near the aforementioned consolidation low.


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