Moody’s Investors Service downgraded the U.S. sovereign credit rating by one notch to “Aa1” on Friday, citing mounting concerns over the country’s expanding debt. The move came shortly after a House panel approved President Donald Trump’s new tax cut bill, which analysts say could significantly add to the national debt.
The combination of higher bond yields and renewed optimism over U.S.-China trade relations has capped the safe-haven appeal of gold. Markets were buoyed by a temporary 90-day trade truce between Washington and Beijing, along with hopes for additional trade agreements with other nations.
Still, analysts suggest the downside for gold remains limited. Persistent geopolitical tensions and dovish expectations for U.S. monetary policy continue to offer underlying support for the yellow metal.
U.S. Treasury Secretary Scott Bessent reiterated over the weekend that President Trump is prepared to impose tariffs on trade partners that do not negotiate in “good faith.” His comments reinforced market demand for safe-haven assets.
Meanwhile, economic data last week pointed to weakening momentum in the U.S. economy. Consumer and producer price indices showed signs of cooling inflation, while retail sales figures disappointed. Additionally, the University of Michigan’s consumer sentiment index fell to 50.8 in May, its lowest level since June 2022. These developments have strengthened expectations that the Federal Reserve will deliver at least two 25-basis-point rate cuts later this year.
The U.S. Dollar continues to struggle under the weight of these dovish expectations, lending further support to non-yielding assets such as gold. However, improving trade sentiment has eased some fears of an imminent U.S. recession, limiting gold’s upside potential.
On the geopolitical front, tensions remain elevated. Israel announced it would allow limited humanitarian aid into Gaza, though indirect talks with Hamas reportedly made no progress. Separately, Ukraine reported a record number of drone attacks by Russia on Sunday. These developments could sustain safe-haven demand for gold in the short term, particularly in the absence of major U.S. economic data and ahead of comments from Federal Open Market Committee (FOMC) members later in the day.
Technical Outlook: Key Levels in Focus
From a technical standpoint, gold is facing resistance near the 200-period Simple Moving Average (SMA) on the 4-hour chart, now acting as a pivotal barrier following a recent breakdown. A sustained move above the $3,250–$3,252 zone would be needed to confirm a bottom and open the door for a recovery toward the $3,275 area and potentially the $3,300 psychological level.
Conversely, a break below the $3,200 mark could expose support around $3,178–$3,177. Further losses might push prices toward last week’s swing low near $3,120—the weakest level since April 10—and ultimately toward the $3,100 and $3,060 support regions.
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