Background on Moody’s Action and Its Impact
On Friday, Moody’s downgraded the top sovereign credit rating of the United States by one notch, making it the last of the major agencies to lower the country’s rating. This move was driven by concerns over the US’s mounting debt, which currently stands at a staggering $14.3 trillion.
Dollar’s Decline and Gold’s Safe-Haven Appeal
The US dollar weakened by 0.7% against a basket of six major currencies, making gold relatively cheaper for foreign buyers. This decline in the dollar’s value, combined with increased risk aversion among investors, has bolstered gold’s appeal as a safe-haven asset.
Expert Opinion on Gold’s Resurgence
Nikos Tzabouras, a market analyst at Tradu.com, explained that “the allure of gold as a safe-haven asset has quickly regained momentum due to growing concerns about US debt.” He further added, “The rising risk aversion and the weakening dollar are helping gold recover from its worst week of the year, keeping the door open for potential new historical highs.”
Gold Price Performance and Other Precious Metals
Spot gold prices rose over 1% on Monday, reversing the previous session’s losses. US gold futures improved by 1.7% to $3,242.60 per ounce.
Historically used as a secure store of value during times of political and financial uncertainty, gold has seen significant gains this year. It reached an all-time high of $3,500.05 per ounce on April 22 and has increased by 22% so far in 2021.
- Gold: Spot gold prices rose over 1% to $3,239.18 per ounce, and US gold futures improved by 1.7% to $3,242.60 per ounce.
- Silver: Spot silver prices increased by 0.8% to $32.52 per ounce.
- Platinum: Platinum gained 0.4% to $992.06 per ounce.
- Palladium: Palladium remained stable at $961.22 per ounce.
Key Questions and Answers
- What caused the recent rise in gold prices? The increase in gold prices is primarily due to the US dollar’s weakness and growing concerns about US debt, which has renewed investor interest in gold as a safe-haven asset.
- How did Moody’s downgrade impact the US credit rating? Moody’s downgraded the top sovereign credit rating of the United States by one notch, citing concerns over the country’s $14.3 trillion debt.
- What are the other precious metals’ performances? Silver prices rose by 0.8%, platinum gained 0.4%, and palladium remained stable.
