Core Viewpoint - Morgan Stanley predicts that gold has about 5% upside potential by 2025, driven by strong central bank purchases and changing investor perceptions of gold as a hedge against inflation and geopolitical risks [1][2]. Group 1: Gold Market Dynamics - Gold has risen over 38% this year, while silver has increased by 42%, indicating significant market changes [1]. - Central bank gold purchases are strong, with gold's share in reserves surpassing U.S. Treasury bonds for the first time since 1996, reinforcing gold's long-term value [1]. - In August alone, gold ETFs saw inflows of $5 billion, marking the highest year-to-date inflow since 2020, reflecting renewed interest from institutional investors [1]. Group 2: Economic Factors Influencing Gold Prices - Despite being a non-yielding asset, gold's appeal remains resilient as inflation in major economies exceeds targets, with investors betting on upcoming interest rate cuts by central banks, which could further boost gold prices [1][2]. - Morgan Stanley expects gold prices to reach a peak of $3,800 per ounce by the end of the year [1]. Group 3: Jewelry Demand and Market Risks - Jewelry demand, which constitutes 40% of gold demand and 34% of silver demand, is showing signs of fatigue, with Q2 gold jewelry demand hitting the lowest level since Q3 2020 due to high prices [2]. - The outlook for jewelry demand remains uncertain, which could impact the overall precious metals market [2]. Group 4: Future Projections and Currency Impact - Morgan Stanley's economists predict that the Federal Reserve will initiate its first rate cut since December 2024 in September, historically leading to average price increases of 6% for gold and 4% for silver within 60 days [2]. - A weaker U.S. dollar is expected to enhance gold's affordability in global markets, with signs of improved gold and silver imports in India as the country plans tax reforms [2].