Gold prices rallied on Monday, gaining over 1% as Moody's downgraded the U.S. government's credit rating, prompting investors to look for safe havens. The news follows a period of extreme market turbulence in the gold market, with prices touching record highs of over $3,500/oz in April 2025, only to subsequently slide by almost 10% recently.
By 10:33 GMT, the price of spot gold edged up to $3,239.18 per ounce, showing a modest recovery after recent declines. Analysts say the price increase is due to the weakening U.S. dollar and a return of safe haven demand for gold.
Nikos Tzabouras, Senior Market Analyst at Tradu.com, observed that "gold's safe-haven appeal has quickly been restored by increasing concerns about U.S. debt." The recent extensive gold selling was only exacerbated by rising risk aversion and a falling dollar, he added, causing the metal to bounce back from its worst week of the year—and could set the stage for fresh all-time highs.
Moody's downgrade of the U.S. credit rating by one notch on Friday focused on concerns about the mounting $36 trillion debt the nation faces. The downgrade, the final one from a major ratings agency, has aggravated investor fears. The result was that the U.S. dollar index saw a 0.7% drop, which made gold cheaper for people purchasing with other currencies.
Contributing to the market's jitters on Sunday, Scott Bessent, a former U.S. Treasury Secretary, said President Donald Trump will use tariffs on countries that are not prepared to engage in "good faith" negotiations. This position has also roiled the world's markets.
Gold has had a strong 2025 performance, rallying 23% so far, despite recent choppiness. Gold prices in India surged to a record high of ₹93,940 per 10 grams in April amid global economic uncertainties and strong demand.
Looking ahead, Goldman Sachs remains bullish, with price targets of $3,700 an ounce by year's end and $4,000 an ounce by mid-2026. That upbeat sentiment is even greater than any reduction in U.S. interest rates by the Federal Reserve and slightly rosier U.S. economic growth.
Spot silver climbed 0.8% to $32.52 an ounce, while platinum rose 0.4% to $992.06 and palladium was flat at $961.22.
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