Gold Rises on Safe-Haven Appeal as Moody’s Downgrades US Credit Rating
The comments below are an edited and abridged synopsis of an article by Pedro Goncalves
Gold rose sharply on Monday following a wave of safe-haven buying triggered by Moody’s downgrade of the United States’ credit rating and renewed trade tensions out of Washington. Gold futures jumped 1.4% to $3,232.70 per ounce, while spot gold climbed 0.8% to $3,229.61 per ounce at the time of writing.
The rating agency Moody’s downgraded US sovereign debt by one notch, citing concerns about the government’s long-term fiscal trajectory and growing debt load. It is the last of the three major credit agencies to strip the US of its top-tier credit rating, deepening investor concerns over the country’s economic stability.
KCM Trade’s chief market analyst Tim Waterer noted that the downgrade and broader market risk aversion helped inject momentum back into gold. “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,” he commented.
The situation was further complicated by political developments. US Treasury Secretary Scott Bessent reiterated President Donald Trump’s commitment to a more aggressive trade policy. In a round of television interviews, Bessent stated that the administration would pursue tariff measures against trading partners that fail to engage in what it deems “good faith” negotiations. These comments sparked renewed fears of escalating trade tensions, which historically have boosted demand for gold as a hedge against geopolitical uncertainty.
Gold has traditionally been considered a reliable safe-haven asset during periods of political and economic instability. It also tends to perform well in low interest-rate environments, where the opportunity cost of holding non-yielding assets is reduced.
Despite gold’s recent rally—up significantly from previous quarters—investor sentiment is growing increasingly cautious. According to the latest global fund manager survey from Bank of America (BofA), a record 45% of respondents now view gold as “overvalued,” compared to 34% in April. That survey was conducted during a period when gold was already reaching record highs.
Francisco Blanch, head of global commodities at BofA, told Bloomberg that gold remains the most heavily positioned asset in investor portfolios. “If we look at our global fund managers survey, gold was the most overly positioned asset across the spectrum. So everyone’s long gold… that’s the trade,” he explained.
While Blanch remains supportive of gold’s long-term prospects, he expressed short-term caution. BofA has lowered its price target for gold to $3,500 per ounce, signalling a belief that the market may have already seen its near-term peak. He suggested that a renewed surge in tensions may be required to drive the next wave of buying.
Overall, the recent price action underscores gold’s enduring appeal amid market uncertainty, but also reveals the mounting concerns over whether the rally is sustainable without fresh catalysts.
