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 toldBloomberg. “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."
Oil prices edged lower on Monday, pressured by concerns over global economic growth following a US credit rating downgrade by Moody’s and fresh signs of slowing momentum in China, the world’s largest crude importer.
Brent crude futures (BZ=F) lost 0.6% to $65 a barrel, while West Texas Intermediate futures (CL=F) retreated 0.4% to $62.22 a barrel.
The sell-off followed Moody’s decision to lower the US sovereign credit rating, fuelling broader market caution. Simultaneously, Chinese data released on Monday showed a deceleration in both industrial output and retail sales growth in April, raising questions over the durability of the country’s recovery.
Priyanka Sachdeva, a senior market analyst at Phillip Nova, said Moody's downgrade raises questions about the outlook for the US economy, and China's data points to a bumpy road ahead for any economic recovery.
She added that Moody's downgrade may not directly impact oil demand, but it does create more sober market sentiment.
Despite the slowdown, China’s factory output figures were slightly stronger than economists had expected. Nonetheless, the outlook remains clouded by ongoing trade friction, even after a tentative truce was struck last week between Beijing and Washington to reverse most of the tariffs imposed in recent weeks.
However, many of China’s goods still face 30% tariffs on top of existing duties, and Trump’s unpredictability on trade continues to weigh on investor confidence.
Elsewhere, uncertainty surrounding nuclear negotiations between the US and Iran helped limit further losses in crude prices. A breakdown in talks could delay any return of Iranian supply to global markets.
Goldman Sachs (GS) analysts have revised their global oil demand forecasts higher, anticipating an increase of 600,000 barrels per day this year and 400,000 per day in 2026. Despite this, the bank held its price targets steady at $60 per barrel for Brent crude and $56 for WTI in 2025. It expects further declines in 2026, forecasting Brent at $56 and WTI at $52.
The pound climbed 0.6% to $1.3355 against the dollar on Monday, buoyed by renewed pressure on the greenback after Moody’s downgraded the US credit rating by one notch.
The credit rating agency cited “escalating debt levels and a growing burden from interest payments” as key factors behind the move, casting fresh doubts over the fiscal outlook of the world’s largest economy.
The downgrade sent the US dollar broadly lower. The US dollar index (DX-Y.NYB), which measures the greenback against a basket of six currencies, fell 0.7% to $100.40.
Further weighing on the greenback, a series of weak US economic indicators has reinforced expectations of rate cuts by the Federal Reserve later this year. The University of Michigan’s Consumer Sentiment Index fell sharply to 50.8 in May from 52.2 in April, the lowest since June 2022 and the fifth consecutive monthly decline. Analysts had forecast a rise to 53.4.
In contrast, the pound found support from stronger-than-anticipated UK GDP figures published on Thursday. The data showed robust monthly and quarterly growth, bolstering investor confidence that the Bank of England may keep interest rates on hold if inflationary pressures persist or intensify.
In other currency moves, the pound was little changed against the euro (GBPEUR=X), which was trading at €1.1888 at the time of writing.
The FTSE 100 (^FTSE) was down 0.5% at 8,640 points. For more details, check our live coverage here.
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