【Gold Price Trend】Gold Price Drops Over 20% from Peak, Enters Bear Market - Morgan Stanley: Funds Flowing from Safe-Haven Assets to Stock Market - Positive Signal for US Stocks

Since the outbreak of conflict with Iran, traditional safe-haven assets like gold have experienced a rare and sharp decline. Investment bank Morgan Stanley pointed out that gold failed to serve as a safe haven during the recent rise in geopolitical risks and instead plummeted, which may actually be a positive signal for stock investors.

According to foreign media citing a report by the bank’s chief equity strategist Mike Wilson on Monday (23rd), since the U.S. and Israel launched preliminary attacks on Iran, gold prices have fallen about 18%, while the S&P 500 index has declined less than 4% during the same period.

Funds Flow from Safe-Haven Assets to Stocks

If calculated from the all-time high of over $5,600 per ounce reached in January this year, the total decline has exceeded 20%, officially entering a bear market. Meanwhile, the ratio of the S&P 500 to gold has surged 12% since the conflict erupted, reflecting an accelerated flow of capital from safe-haven assets to equities.

Morgan Stanley considers the “S&P 500 / Gold ratio” as a key indicator to gauge market pricing of overall economic health, corporate performance, and consumer confidence. When this ratio rises, it indicates that stocks are performing more strongly relative to gold, suggesting a rebound in risk appetite.

“The sharp decline in gold may be the clearest signal that the momentum of this conflict is developing in a direction favorable to the U.S., even more evidently than the market generally perceives.”

Wilson further pointed out in the report that the rise in the S&P 500 / gold ratio has triggered buy signals based on some technical indicators, indicating that the market remains relatively optimistic about the U.S. economy and corporate earnings prospects.

The bank also noted that another possible reason for gold’s recent weakness is that some governments may be selling part of their gold reserves to cover increased costs brought by the war, such as rising oil and commodity prices. This further confirms that the market is not as complacent about geopolitical risks as some forecasters feared.

Morgan Stanley believes that although this geopolitical conflict brings short-term volatility, gold’s failure to act as a traditional safe haven is not necessarily bad news. Instead, it suggests that the impact of the conflict on the global economy and U.S. companies may be more manageable than market expectations, maintaining a relatively optimistic outlook for U.S. stocks.