Gold prices climbed on Monday, buoyed by a fresh wave of safe-haven buying following Moody’s decision to downgrade the US credit rating and renewed trade tensions out of Washington.
Gold futures (GC=F) climbed 1.4% to $3,232.70 per ounce at the time of writing, while the spot gold price rose 0.8% to $3,229.61 per ounce.
“The Moody’s downgrade of the US credit rating, and the corresponding risk-off reaction by the market, has put some pep back into the gold price,” said KCM Trade chief market analyst Tim Waterer.
Moody’s cut its rating on US sovereign debt by one notch on Friday, citing concerns over the government’s fiscal trajectory and ballooning debt burden. It is the last of the three major credit agencies to strip the US of its top-tier rating.
Sentiment was further rattled by Treasury secretary Scott Bessent, who reiterated president Donald Trump’s intention to press ahead with tariff threats made last month. In a series of television interviews on Sunday, Bessent said Trump would act against trading partners that fail to negotiate in “good faith”.
Traditionally considered a safe-haven asset during political and economic uncertainty, gold thrives in a low interest rate environment.
Yet despite gold’s sharp rise in recent months, scepticism among investors is growing. A record 45% of respondents to Bank of America’s latest global fund managers survey now view gold as an “overvalued” asset, up from 34% in April, when prices were rallying to all-time highs.
“I think the gold story is pretty straightforward … if we look at our global fund managers survey, gold was the most overly positioned asset across the spectrum,” Francisco Blanch, head of global commodities at BofA told Bloomberg. “So everyone’s long gold … that’s the trade.”
“Now, I’m not necessarily bearish long term; we still like gold in the long run, but we have a $3,500 lower price target. We believe, for now, the peak might be in, and we might have to see another layer of tensions building up from the US.”
