Gold Rockets Over 1.5% After US Credit Downgrade – Bulls Target $3,300

Gold Rockets Over 1.5% After US Credit Downgrade – Bulls Target $3,300

Gold prices surged on Tuesday, continuing their upward momentum for the second consecutive day, as investors responded to growing concerns over the US economy’s financial stability and the global interest rate outlook. The XAU/USD pair currently trades at $3,289, marking a gain of over 1.5%.

The rally comes in the wake of a major credit rating downgrade by Moody's, which cut the United States’ long-standing AAA rating to AA1 with a stable but negative outlook. This move rattled investor confidence and triggered a flight to safety, lifting demand for non-yielding assets like gold.

Adding to the bullish momentum, equity markets in the US turned red during the North American session, reflecting broader risk aversion. Investors are increasingly hedging against a backdrop of weakening economic data, political gridlock, and questions around fiscal responsibility in Washington.

Federal Reserve officials have adopted a cautious stance in recent communications. Atlanta Fed President Raphael Bostic stated on Monday that he expects just one rate cut in 2025, reinforcing a scenario of “higher for longer” interest rates. Meanwhile, Fed’s Adriana Kugler and others have refrained from indicating any near-term policy easing, citing persistent inflationary pressures and potential stagflation risks.

Globally, central banks such as the People’s Bank of China (PBoC) and the Reserve Bank of Australia (RBA) have already begun trimming interest rates in response to slowing growth. These rate cuts have added fuel to the gold rally, as lower yields globally enhance the appeal of assets that do not offer interest—like gold.

The US dollar also continues to weaken, driven by heightened uncertainty over future trade policies and concerns surrounding the US debt position post-downgrade. The declining Greenback further supports gold prices, as it makes the metal cheaper for holders of other currencies.

Market analysts suggest that if risk-off sentiment persists and yields remain suppressed, gold could test the psychological resistance level at $3,300 in the coming sessions.