1、M Ideametal&ROCK|EuropeScenarios for Gold Golds weakness since the start of the conflict is not unexpected,and history suggests it can rebound quickly after shocks.However,if we see more persistent inflation that drives rate hikes,the set-up may be more challenging.We continue to see upside,but two-

2、way risks are rising.Morgan Stanley&Co.International plc+Amy Gower(Amy Sergeant),CFACommodities Strategist Amy.G +44 20 7677-6937 Ben KelsonAnalyst Ben.K +44 20 7677-1392 Martijn Rats,CFAEquity Analyst and Commodities Strategist Martijn.R +44 20 7425-6618 Exhibit 1 :Gold has not acted as a safe have

3、n since the start of the Middle East conflict but had stacked up significant gains coming into it-40%-20%0%20%40%60%80%100%120%GoldCopperS&P 500US 10Y TreasuryDXYBitcoinBrent Crude OilPerformance Since Start of Middle East Conflict Jan25-Feb26Since end Feb26 Source:Bloomberg Gold has been under pres

4、sure since the start of the Middle East conflict:Gold is down 5%since Feb 27 as strong YTD performance,a strengthening USD and its highly liquid characteristics have outweighed geopolitical risk-related inflows.This is not unusual and we note similar pullbacks in Covid,the start of the Russia-Ukrain

5、e conflict and Liberation day.We have been constructive on gold:We have been highlighting our 2H bull case of$5700/oz,driven by our expectations of continued central bank buying,Fed rate cuts supporting ETF inflows and a shift in investor interest in real assets.But recent events bring more two-way

6、risks:While geopolitical risk can be supportive for gold,its performance in 2H 2022(Exhibit 2)shows us that this is not always the case,especially if it drives inflation and Fed rate hikes.Our US economists still see two cuts this year,assuming the Fed is able to look through inflation,and we also n