Gold's traditional reputation as a safe-haven asset is facing fresh scrutiny after prices declined during the ongoing Iran conflict, according to a report by Morgan Stanley.
The report noted that despite heightened geopolitical tensions, gold has underperformed several major asset classes, raising questions over its reliability during periods of crisis.
"Gold has stumbled in the wake of the Iran conflict after delivering consistent annual gains since 2021," the report said, adding that the metal's recent weakness reflects a shift in investor focus towards monetary policy and real interest rates rather than geopolitical uncertainty.
According to the report, gold fell 14.5 per cent in March -- the first month of the conflict -- while global equities and US Treasury indices also declined, though by smaller margins. The precious metal has remained nearly 10 per cent below its pre-conflict levels even as equities recovered in April.
All eyes on monetary policy
Morgan Stanley Research's Metals & Mining Commodity Strategist Amy Gower said, "Gold's sensitivity to monetary policy has taken over as the key price driver." She added that the metal's safe-haven appeal has been "overshadowed" by expectations of higher real interest rates.
The report highlighted that rising oil prices and supply disruptions linked to the conflict have reduced expectations of lower US interest rates, making non-yielding assets such as gold less attractive to investors.
Additional pressure has also emerged from reduced purchases by central banks and exchange-traded funds (ETFs). Turkey's central bank reportedly sold 52 tons of gold between late February and late March, while ETFs liquidated nearly 90 tons of previously accumulated holdings.
What the future holds
However, Morgan Stanley expects gold prices to recover later this year as central banks and ETFs resume buying activity and markets begin pricing in future US Federal Reserve rate cuts. The investment bank forecasts gold could rise to around $5,200 per ounce in the second half of 2026.
The report comes amid broader market discussions on whether gold's role as a hedge against geopolitical crises is weakening in an environment increasingly driven by inflation expectations, energy shocks and interest-rate dynamics.
Published on May 7, 2026