Gold snapped a five-week wining streak Friday, but the yellow metal's bullish run likely isn't over yet as tailwinds including central bank demand have more room to go just as the tide of outflows from gold exchange traded funds are starting to turn.  

Gold prices rose 0.3% to $2,348.75, but took heavy losses earlier this week following easing Middle East tensions after Iran-Israel showed little appetite to escalate their tit-for-tat exchange.  

The path ahead for gold prices is set to be choppy but likely leans toward higher highs, rather than a reversal, Morgan Staley said, forecasting the odds are more in favor of its bull case scenario, which sees gold rising to $2,760 an ounce in the second half of the year, rather than its bear case scenario of a fall to $2,000 an ounce.

The strength in the demand for the yellow metal has provided it with extra clout to withstand the weight of rising real interest rates, which have a long history of hampering investor appetite for non-interest bearing assets like gold.

Gold is typically expected to have a "negative correlation with real yields, given it loses relative competitiveness in investor portfolios as real yields rise," Morgan Stanley said, but is now showing a positive correlation with real yields on a 3-month basis as fundamental drivers have been dominating price action.  

Central bank purchases of bullion, led by People's Bank of China, demand for safe havens amid rising geopolitical tensions, and growing demand for an inflation hedge have helped kept gold on the up, and up.

These bullish factors, particularly central bank buying, aren't likely to disappear anytime soon. 

Gold consumption in China rose 5.94% from a year earlier to 308.91 tons in the first quarter of the year, China Gold Association said Friday, driven by soaring safe-haven demand.

The PBoC bullion purchases continued for a 17th straight month in March, taking its total gold reserve to 2,262.67 tons by the end of Q1, according to the China Gold Association.

Meanwhile, ETF demand has been weak throughout gold's rally as outflows have continued, but the tide of outflows are "starting to turn," Morgan Stanley said.

U.S. and Asia ETFs have seen inflows since mid-March, according to the World Gold Council, but that has been offset by outflows in Europe.

While these fundamental positive drivers show no sign of cooling, the macroeconomic outlook, in which U.S. inflation appears to be more sticky, keeping rates higher for longer, has some doubting gold's next move higher. 

"But if data stays strong, driving concerns of more sticky inflation, as well as elevated geopolitical risk, gold may stay well bid regardless," Morgan Stanley said, adding that if a rate-cut is brought forward that is often another positive catalysts for gold.