Morgan Stanley has revised its gold price forecast downward. Since the joint military engagement by the United States and Israel against Iran commenced, gold has consistently underperformed the broader market. Analysts now project that the price of gold will rise to $5,200 per ounce in the second half of 2026, up from the current level of approximately $4,830 per ounce. This revised forecast is lower than the previous optimistic scenario, which anticipated a price of $5,700. "We remain positive on gold, but the potential upside has narrowed compared to our previous outlook," wrote Morgan Stanley commodity strategists, including Amy Gower, in a report on Monday. The primary reason for this downward revision is the risk that rising energy prices could feed into core inflation measures, thereby reducing the likelihood of interest rate cuts by the Federal Reserve. "The conflict has triggered an energy supply shock, leading to diminished market expectations for Fed rate cuts. Consequently, gold's recent failure to act as a safe-haven asset is not surprising," the analysts stated in the report to investors on Monday. They also noted that gold had experienced a significant rally prior to the outbreak of the conflict, which is one factor contributing to the substantial price correction observed recently. Since the onset of the current hostilities, the gold price has declined by approximately 8.5%. Morgan Stanley economists continue to anticipate that the Federal Reserve will implement two interest rate cuts this year, contrasting with the Fed's current guidance, which suggests only one cut. Gower and her team wrote that a scenario involving two rate cuts "would be positive for gold. Gold ETFs are particularly sensitive to the direction of monetary policy, and the gold price is now re-coupling with real interest rates." They added, "While the gold price has re-established its correlation with real yields and will likely remain sensitive to them, we believe there is still room for further price appreciation."