Morgan Stanley warns that a possible peace agreement, potentially brokered by former President Donald Trump between Russia and Ukraine, could present the largest risk to gold’s recent bull market. The bank estimates such a resolution might push gold prices down by about 17%, to near $2,400 per ounce.
The firm attributes much of gold’s roughly 50% gain since 2022 to a sharp rise in central bank purchases. After Russia’s invasion of Ukraine, central bank buying roughly doubled, surpassing 1,000 tonnes per year and becoming a major support for higher prices.
In its base-case scenario, Morgan Stanley continues to see gold around $2,850 per ounce. However, the bank cautions that a credible peace deal would likely reduce the perceived need among central banks to hold as much gold as insurance against geopolitical and economic risk, which could significantly weaken demand and weigh on prices.
Beyond central bank buying, factors that have supported gold include inflation concerns, low real interest rates at various points since 2022, and safe-haven demand tied to geopolitical uncertainty. A meaningful improvement in geopolitical tensions, particularly between major economies or in Europe, would remove a key driver that encouraged large sovereign and institutional accumulation over the past few years.
Morgan Stanley’s sensitivity analysis highlights how a shift in central bank behavior could alter market dynamics. If central banks scale back purchases because global risks subside, the market could face an oversupply relative to the demand expectations that have been embedded in current prices. That potential imbalance underpins the bank’s downside scenario to around $2,400 per ounce.
The outlook for gold remains tied to multiple moving pieces: central bank policy, inflation expectations, real interest rates, currency movements, and geopolitical developments. While a negotiated end to the Russia-Ukraine war would be positive for global stability, it could simultaneously remove a strong source of demand for gold, creating headwinds for bullion prices even as broader economic conditions evolve.
Investors and policymakers will likely watch central bank behavior closely in the aftermath of any peace initiative. A rapid reduction in sovereign purchases would matter more to price formation than a gradual shift, and markets may react differently depending on how other demand segments—such as jewelry, ETFs, and industrial uses—respond to changing sentiment.
For those tracking the gold market, the key takeaway from Morgan Stanley’s view is that geopolitical outcomes can have large and rapid effects on demand psychology and on the positioning of major institutional buyers. While the bank’s base case remains above current levels, its downside scenario underscores the importance of monitoring central bank flows and geopolitical developments when assessing gold’s near-term path.