Morgan Stanley has raised questions about gold’s role as a risk management tool in investment portfolios, especially after experiencing significant fluctuations in commodity prices over the past six weeks. The recent conflict in Iran has caused the value of gold to drop substantially, mirroring trends in various global asset classes. As of early Thursday morning, gold was trading at approximately $4,731.775, marking a decrease of about 7.8% from the previous month, though prices had earlier surged due to a ceasefire announcement.
Amy Gower, a metals and mining strategist at Morgan Stanley, mentioned in an interview that “gold is actually acting like a risk asset, not really like a safe asset.” She highlighted the expectation that investors typically diversify their portfolios with gold during uncertain times, but that trend isn’t manifesting currently. Gower also pointed out that, while it’s common to see gold prices weaken following market shocks as investors seek liquidity, the metal’s value is now particularly susceptible to movements by large institutional entities like central banks and ETFs.
On the other hand, Gower noted that silver genuinely had a reason to increase in value, as it has surged nearly 150% over the past year. She explained that despite hidden deficits in precious metals, the economic circumstances made the demand for silver apparent last year. The solar industry’s expansion is a significant factor contributing to this demand spike. However, despite its impressive growth, silver has also experienced a decline, falling over 11% in the last month, with current prices around $74 per troy ounce, well below January’s peak exceeding $100. Gower expressed skepticism about the January surge in silver prices, suggesting that it was influenced more by speculation than fundamentals. “But what we’re seeing now,” she stated, “is a real shift in demand,” with some major silver jewelry producers weighing a switch to platinum-coated alternatives due to price volatility.
When it comes to aluminum, Gower remains optimistic, especially given the recent surge in prices amid concerns of supply shortages stemming from the turmoil in the Gulf region. Since the Iran conflict began, aluminum prices have jumped about 10.4%, now sitting at $3,452.8 per tonne. Gower explained that the market for aluminum is already strained, with China indicating it won’t boost its supply and demanding significant electricity resources. She further elaborated on the competitive landscape shaped by AI growth and data centers, stating, “We’re currently losing about 4% of the world’s aluminum supply,” emphasizing that, even with a resolution to the conflict, aluminum’s return to normal levels could take time.
