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Will Moody’s Downgrade and Rising Yields Reignite Gold Bulls?
Moody’s downgraded the U.S. sovereign credit rating by one notch on Friday, citing unsustainable debt levels. The decision triggered a selloff in U.S. equities and the dollar, while Treasury yields spiked—raising concerns that higher long-term borrowing costs could weigh on growth. The 10-year yield rose to 4.51%, and the 30-year yield breached 5% for the first time in over a month.
Despite rising yields, the dollar index (.DXY) fell 0.5% on Monday, helping gold regain ground lost during its worst week since November, when it fell over 2%. Analysts say the downgrade and its associated risk-off sentiment are recharging interest in gold, even with rate cut expectations cooling slightly.
Trump Tariffs and Trade Uncertainty Fuel Gold Prices Forecast
U.S. Treasury Secretary Scott Bessent confirmed on Sunday that President Trump will impose tariffs on nations not negotiating in “good faith.” With tariff policy still in flux, market participants are bracing for renewed trade disruptions. Bessent heads to the G7 for further talks, while analysts note that policy uncertainty—especially around tariffs—continues to weigh on global sentiment.
Retail sales and inflation data from last week painted a weaker-than-expected economic picture, bolstering expectations of a potential Fed rate cut by September. The market is now pricing in 52 basis points of easing for the year, down from over 100 bps a month ago.
Dollar Weakness and Fed Outlook Set the Stage for Gold Rally
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