Institution: Gold Risk-Return Profile Reverses, $500 Downside Risk Swapped for $1500 Upside Potential
BlockBeats News, July 22nd - Sameer Samana, Global Equity and Thematic Strategist at Wells Fargo, stated that after gold witnessed a more than 20% pullback from its January all-time high, the market's risk-reward structure has changed. The downside potential for gold is narrowing, and the long-term upside potential continues to attract investors.
Samana mentioned that the market has largely priced in the Fed's rate hike risk. If the federal funds rate futures have already priced in expectations of two to three future rate hikes, then the gold price has also largely reflected a similar degree of tightening pressure. What the current market needs to focus more on is whether there will be an unexpectedly large-scale rate hike in the future, although the likelihood of this happening is not high.
Recently, gold has been under pressure mainly due to rising oil prices, increased Fed tightening expectations, and rising real yields. However, Samana believes that market sentiment may have become overly pessimistic, and most bearish factors have already been priced in.
He pointed out that in the short term, gold may still continue to test lower levels, as the technical outlook has not yet confirmed a bottom, posing a risk for the price to fall to $3,500. At the same time, the $4,500 to $4,900 range could potentially act as a resistance level for a rebound, with some investors who bought at previous highs choosing to exit with stop-loss orders.
However, from a long-term perspective, Samana believes that the uptrend in gold remains intact. He stated that an economic slowdown could prompt the Fed to cut rates again and urge policymakers to take more accommodative measures, thereby providing new upward momentum for gold.
Wells Fargo Investment Institute previously projected that the price of gold could rise to between $5,300 and $5,500 per ounce by the end of 2026 and further increase to between $5,800 and $6,000 by the end of 2027.
