Gold prices rose on Monday, buoyed by renewed demand for safe-haven assets following Moody’s Ratings downgrade of the United States’ sovereign credit rating. However, the precious metal later pared back some of those gains amid market volatility.
Spot gold climbed as much as 1.4% in early Asian trading, reaching above $3,218 an ounce, before easing to trade at $3,218.30 as of 1:04 p.m. in Singapore — a 0.5% increase on the day.
The initial rally came in response to Moody’s decision late Friday to cut the US government’s long-standing Aaa rating to Aa1, citing persistent fiscal challenges. “While we recognize the US’ significant economic and financial strengths, we believe these no longer fully counterbalance the decline in fiscal metrics,” the agency said in a statement.
Haven Demand Returns Amid Fiscal Worries
Gold’s rise reflects investor concerns over the growing US budget deficit and broader economic outlook, prompting a flight to safety. Despite the downgrade, the US still maintains high creditworthiness, but the move underscored structural financial concerns that have persisted across multiple administrations.
The metal has experienced considerable volatility in recent months. After briefly topping $3,500 an ounce last month — a historic high — gold logged its steepest weekly decline since November last week, as easing geopolitical tensions cooled investor appetite for defensive assets.
Still, gold remains one of the top-performing assets of the year, up more than 20% year-to-date. Its rally has been supported by ongoing geopolitical risks, uncertainty surrounding US economic policy, and strong inflows into exchange-traded funds.
Analysts See Continued Volatility with Long-Term Upside
“Gold is likely to remain volatile in the short term, as markets react to a combination of positive and negative headlines,” said Vasu Menon, managing director of investment strategy at Oversea-Chinese Banking Corp. He added that over the long term, the combination of former President Donald Trump’s trade policies and a global move to diversify away from dollar-based assets could provide “structural tailwinds” for gold, potentially propelling prices to new highs.
Meanwhile, other precious metals also posted modest gains. Silver, palladium, and platinum all edged higher during the session. The Bloomberg Dollar Spot Index fell 0.2%, further supporting non-dollar-denominated assets such as gold.
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