Spot gold rose 1% to $3,233.27 per ounce by 10:50 a.m. ET, after reaching as high as 1.4% earlier in the session. U.S. gold futures mirrored the gains, jumping 1.5% to $3,233.40 per ounce on the New York exchange.
The rally followed Moody’s announcement late Friday that it had downgraded the U.S. sovereign credit rating from Aaa to Aa1, citing concerns over the nation’s expanding budget deficit. The move weakened the U.S. dollar, which fell 0.8% on Monday, while U.S. Treasury yields steepened and stock markets came under pressure.
“The main supporting factor for gold today is the downgrade of American debt by Moody’s,” said Fawad Razaqzada, market analyst at City Index and FOREX.com, in a statement to Reuters.
Trade and Global Risks Add to Bullish Sentiment
Further uncertainty surrounding international trade also helped lift gold prices. On Sunday, U.S. Treasury Secretary Scott Bessent warned that the controversial ‘Liberation Day’ tariffs could be reinstated for countries that fail to negotiate trade agreements in good faith.
Meanwhile, weaker-than-expected economic data from China weighed on global risk appetite, prompting a shift toward safer investments such as gold.
Analysts Expect Continued Volatility and Long-Term Strength
Market participants are bracing for short-term price swings amid a backdrop of mixed economic signals.
“We expect gold to be volatile in the short term as we see a mix of good and bad news headlines,” said Vasu Menon, Managing Director of Investment Strategy at Oversea-Chinese Banking Corp. However, Menon believes long-term fundamentals remain favorable, citing former President Donald Trump’s policy direction and ongoing diversification away from the U.S. dollar as “structural tailwinds” that could propel gold to new record highs.
Despite recent fluctuations, gold remains one of 2025’s top-performing assets, having surged 23% year-to-date. In April, it surpassed $3,500 an ounce for the first time in history.
Bullish Outlook from Major Banks
Leading financial institutions continue to forecast further upside for gold. JPMorgan projects the metal will average $3,675 per ounce by the end of 2025, potentially rising to $4,000 by the second quarter of 2026. Similarly, Goldman Sachs reaffirmed its year-end forecast of $3,700 and anticipates a move to $4,000 by mid-2026, even as the likelihood of delayed Federal Reserve rate cuts and lower recession risks temper some of the market’s expectations.
As macroeconomic uncertainty persists, gold’s appeal as a hedge against both financial instability and geopolitical risk remains strong, with analysts broadly confident in its upward trajectory.
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