Wells Fargo Identifies Rotation Potential Within Commodities

Scott Wren, senior global market strategist at Wells Fargo Investment Institute, says the focus should be on sectors where earnings growth is robust and valuations remain reasonable. In a note dated Wednesday, he referenced the institute’s recent sector shift on April 6, when energy was downgraded from neutral to unfavorable and technology was upgraded to favorable. At the same time, the firm kept a most favorable rating on financials and retained favorable views on industrials and utilities.

Wren points out that a similar pattern is emerging within the commodities arena. Energy‑related commodities surged in early April as oil prices rose amid the early stages of the U.S.–Israeli conflict with Iran. However, other commodity groups lagged, with gold and copper prices falling under pressure.

According to Wren, gold’s decline was partly driven by international investors selling the metal to obtain U.S. dollars needed for oil purchases, since oil is priced in dollars. This divergence, he argues, creates an opportunity to shift exposure away from energy‑focused commodities toward precious metals, which remain the preferred segment in the broader commodities universe.