Whenever there’s a spike in geopolitical tensions, gold usually wastes no time in pushing forward with aplomb. 

However, since the Iran war has started, the shiny yellow metal hasn’t followed the usual script.

Morgan Stanley analysts, though, believe that the recent choppiness isn’t indicative of fading safe-haven demand. Instead, Amy Gower and her team point to a couple of potent forces, a stronger U.S. dollar and a scramble for liquidity, as reasons for the sluggishness.

For some color, according to Reuters, after the commencement of the Iran war, spot gold surged to $5,260/oz on Monday, then pulled back sharply with investors “dashing for cash.” 

The correction was more pronounced on March 3, when spot gold dropped nearly 3.6% to roughly $5,137/oz. 

Moreover, at the time of writing, as per GoldPrice.org, gold was $5,165.63 per ounce, or roughly $166.08 per gram and $166,078.74 per kilogram.

In my last piece, covering the safe-haven metal, I covered JPMorgan’s big reset higher in its long-term forecast, bumping it to $4,500 while also keeping its eye-popping $6,300 year-end 2026 call intact. 

When that story ran on Feb. 25, 2026, gold traded at around $5,202 per ounce, which implies a drop of $36.37 per ounce, or roughly 0.70% from current prices.

According to the big bank’s analysts, expectations around Fed rate cuts, evolving currency markets, geopolitical tensions, and broader liquidity issues continue to influence gold’s current trajectory.

Interestingly, I covered a Bank of America piece in which the bank dispelled the AI doom narrative, calling it mostly psychology-driven fear. That’s the same thread Morgan Stanley is running on, that narratives move quickly and often move markets.

Moreover, I also covered billionaire Ray Dalio recently after Davos, who also took a similar long-term view, arguing that having a 5% to 15% slant in your portfolios to gold makes sense considering the market’s fragility.

Morgan Stanley feels that dynamic is unlikely to last long. If geopolitical tensions remain elevated, the bank expects gold prices will eventually catch up.

Morgan Stanley links gold’s decline to dollar strength and liquidity pressures

Photo by adventtr on Getty Images

Wall Street’s targets on gold

  • Morgan Stanley: $5,700/oz (bull case, second half of 2026).
  • Goldman Sachs: $5,400/oz (by December 2026).
  • J.P. Morgan: $6,300/oz (2026 year-end / 4Q 2026).
  • UBS: $6,200/oz (target for March/June/September 2026).
  • Deutsche Bank: $6,000/oz (2026 target).
  • Citi Research: $5,000/oz (0–3 month target).
    Source: Reuters, Investing.

Related: Morgan Stanley delivers curt 2-word verdict on S&P 500

Morgan Stanley explains gold’s puzzling post-war pullback

As mentioned earlier, Morgan Stanley feels gold’s recent wobble is a result of multiple macro forces colliding at once. 

More Gold:

  • Gold, silver surge after record drop flashes technical signal
  • Silver and gold tumble triggers major reset for mining stocks
  • J.P. Morgan revises gold price target for 2026

Gower and her team said that the king metal’s initial move following the Iran ation followed the usual script. 

Initially, gold rallied sharply, but the move quickly ran into significant pressure from currency markets and broader risk positioning.

That correction fed into a sudden bid for the greenback.

Related: Veteran analyst drops eye-popping price target on Palantir stock

As per a recent Reuters poll, the U.S. dollar has risen nearly 1.5% since the beginning of the war. Moreover, dollar strength also directly ties to Fed-cut expectations. By March 5, the dollar index continues rising higher, up 0.11% to 98.91.

On March 3, commentary linked the dollar’s ascent to fading easing bets, with money markets pricing in just 37 bps of cuts for the year, compared to 60 bps the previous Friday. That sentiment has everything to do with oil-driven inflation fears, which have made the near term much less certain.

On top of that, Morgan Stanley argues that liquidity dynamics are another critical piece of the puzzle. In times of market-related stress, investors usually sell off liquid assets, including gold, simply to raise cash. That leads to a temporary overpowering  of the metal’s safe-haven bid.

The bank sees that sluggishness as more tactical than structural. 

If geopolitical tensions continue to stay elevated and macro conditions stabilize, Morgan Stanley forecasts gold to catch up to the current risk backdrop, pushing toward $5,700 per ounce later this year.

SPDR Gold Shares vs SPDR S&P 500 ETF Trust returns

  • 2026 YTD (through March 4, 2026): SPDR Gold Shares (GLD) 19.05% vs SPDR S&P 500 ETF Trust (SPY) 0.47%.
  • 2025: GLD 63.68% vs SPY 17.72%.
  • 2024: GLD 26.66% vs SPY 24.89%.
  • 2023: GLD 12.69% vs SPY 26.18%.
  • 2022: GLD -0.77% vs SPY -18.17%.
  • 2021: GLD -4.15% vs SPY 28.73%.
  • 2020: GLD 24.82% vs SPY 18.33%.
    Source: FinanceCharts.

Related: Bank of America drops blunt message on the economy