Gold prices surged on Monday as investors flocked to safe-haven assets in response to heightened concerns over the U.S. fiscal outlook and mounting budget deficits. The move followed Moody’s Ratings’ decision late Friday to downgrade the United States’ long-standing Aaa credit rating to Aa1.
The precious metal rose 1.3% to approximately $3,245 per ounce, recovering from recent losses and reaffirming its role as a refuge during economic uncertainty.
Moody’s cited persistent fiscal deterioration as the primary reason for the downgrade. “We acknowledge the U.S.’s substantial economic and financial strengths,” the agency said in a statement, “but we feel these no longer adequately offset the decline in fiscal metrics.”
Gold has experienced considerable volatility in recent weeks. After rallying to a record high above $3,500 an ounce last month amid geopolitical tensions, the metal faced its steepest weekly decline since November as those tensions eased and investor sentiment shifted.
Despite short-term pressures, including changes in interest rate expectations and reduced fears of stagflation, gold remains up more than 5% year-to-date. Analysts attribute this resilience to ongoing global conflicts, trade tensions, and continued investment through exchange-traded funds.
At the peak of market anxiety in April, traders were pricing in Federal Reserve interest rate cuts totaling 120 basis points. By year-end, market expectations had adjusted to around 58 basis points of easing, reflecting a recalibration of monetary policy forecasts.
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