Institution: Gold's risk-reward structure has reversed, offering $1,500 in upside potential against only $500 in downside risk.

Wells Fargo Global Head of Equity and Real Assets Strategy Sameer Samana said that after gold corrected more than 20% from its January all-time high, the market’s risk-reward structure has shifted, with the metal’s downside narrowing while its long-term upside potential remains attractive to investors. Samana noted that the market has already priced in most of the Federal Reserve’s interest rate hike risks. If federal funds futures have factored in expectations of two to three additional rate hikes, gold prices have also largely reflected a similar degree of tightening pressure. The key concern for the market now is whether larger-than-expected rate hikes will emerge in the future, a possibility that is low. Recent downward pressure on gold is mainly driven by rising oil prices, growing expectations of Fed tightening, and higher real yields. However, Samana believes market sentiment may have turned overly pessimistic, with most negative factors already priced into prices. He pointed out that gold may continue to dip in the short term, as the technical side has not yet confirmed a bottom, leaving a risk of the price falling to $3,500. Meanwhile, the $4,500 to $4,900 range could act as a resistance level for a rebound, as some investors who bought at higher levels may choose to cut losses and exit positions. But looking at the long-term cycle, Samana argues that gold’s uptrend has not been broken. He said an economic slowdown could push the Fed to resume rate cuts and prompt policymakers to adopt more easing measures, which would provide new upside momentum for gold. Wells Fargo Investment Institute previously projected that gold prices could rise to $5,300 to $5,500 per ounce by the end of 2026, and further climb to $5,800 to $6,000 by the end of 2027.