On Monday gold rose by more than 1% above the $3,240 mark, as markets appeared to reflect an obvious shift in investor sentiment, following Moody’s downgrading of the US from ‘AAA’ to ‘Aa1’ citing rising likely deficits and rising interest costs. On Friday, Moody’s had downgraded the US sovereign credit rating from ‘AAA’ to ‘Aa1’, with the reason for it being an increase in deficits and interest costs, with yields spiking on US bonds, which caused volatility in markets across the globe and in turn increased demand for safe-haven assets such as gold.
As of publication, gold prices (XAU/USD) are trading around $3,243, which is more than 1% on the day. Also, President Trump is set to speak with Russian President Vladimir Putin, which may also impact market sentiment with regard to the war in Ukraine. Other factors that are driving gold prices up include rising geopolitical tensions and the persistent and ongoing decline in the fiscal situation in the US.
Middle East Escalation and Bond Turmoil Fuel Gold Rally
Geopolitical risks are still high. This week, the Israeli Defense Forces began a large ground offensive, just days after US President Trump wrapped up a Middle East trip, albeit without a stop in Israel. This new military action is raising fears regarding a potential conflagration and is aiding in the case for gold for its hedge properties.
At the same time, the bond market is feeling the effect of the Moody’s US downgrade as the 30-year US Treasury yield is now above 5%—where it was as of April. Pension funds and other institutional investors are duly expected to rebalance bond investments to match their downgraded credit ratings. Also, analysts worry that foreign investors may return to the market, only requesting higher yields to hold US debt, effectively adding more tension to the Federal Reserve’s diminishing level of policy room.
Trump-Putin Call Adds Uncertainty to Gold’s Path
While safe-haven demand is strong, one potential headwind for gold could come from diplomacy. President Trump is set to speak with Russian President Putin on Monday about ending the Ukraine war. If any breakthrough is achieved, gold may see a pullback due to reduced geopolitical risk.
Trump previously criticized peace talks in Istanbul, saying no agreement would hold without both him and Putin directly involved. Any significant development from the call could shift investor flows away from gold toward risk assets. However, with market confidence still shaken by the US credit rating cut, gold remains firmly supported above $3,230.
Gold Technical Outlook
From a technical perspective, gold faces resistance at $3,245, the April 1 high. If broken, the next upside targets are $3,252 (R1) and $3,301 (R2). A breakout would likely require a major catalyst—possibly another escalation or fiscal shock.
Support lies at the pivot point of $3,203, with further downside protection around $3,167 and $3,151, near the 55-day Simple Moving Average. As long as gold holds above $3,200, the bullish outlook remains intact.
Despite rising US bond yields, gold continues to outperform as investors reposition around a changing macro landscape marked by fiscal instability, geopolitical risk, and central bank constraints.
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