Wells Fargo flags gold's risk-reward shift below $4,100 as upside grows

Gold's risk-reward profile has turned favorable for investors near $4,100 an ounce, according to Wells Fargo strategist Samana.

Gold traded at $4,071 an ounce Tuesday, up 1.5%, after Wells Fargo said the metal's risk-reward has flipped in investors' favor below $4,100.

"The downside risks are becoming increasingly limited while the long-term upside remains compelling," Samana, a strategist at Wells Fargo, said.

Gold has lost roughly 28% of its value since hitting a record near $5,600 an ounce in late January. The selloff accelerated as a stronger US dollar and rising expectations for Federal Reserve rate hikes weighed on the non-yielding asset. The US Dollar Index rose 0.12% to 101.11 on Tuesday, while the 10-year Treasury yield climbed 3.5 basis points to 4.628%, according to market data.

The Federal Reserve's July 29 policy meeting is the next major event on the calendar. Prime Terminal data shows a 78% probability the Fed holds rates steady at 3.50%-3.75%, while the likelihood of a September hike stands at 68%.

Gold's 28% Slide From Record Creates Entry Point

The precious metal's decline from its January record near $5,600 has erased roughly $700 billion in market value across gold and silver in a single session earlier this month, according to market data. ETF outflows have accelerated, with SPDR Gold Shares bleeding $14.4 billion since March 1 — 50% more than the $9.6 billion pulled from all spot Bitcoin ETFs over the same period.

The US-Iran conflict adds a layer of uncertainty. President Donald Trump is weighing whether to accept Iran's proposed 10-day ceasefire or escalate to a full-scale war targeting Tehran and Iran's nuclear sites, according to newswire reports. Oil prices have risen on supply disruption fears, fueling inflation expectations that support the case for higher-for-longer interest rates.

From a technical perspective, gold needs to clear resistance at $4,125 to shift the near-term trend higher, with the 50-day simple moving average at $4,264 as the next major level. On the downside, support sits at $4,000, followed by $3,959 and the October 2025 low of $3,886.

This article is for informational purposes only and does not constitute investment advice.