Gold climbed to a one-week high, back above $3300 an ounce, early Wednesday on haven demand as the dollar continued to weaken following Moody’s Ratings’ U.S. credit rating cut late last week.
The ratings service cut the top U.S. credit rating to Aa1 from Aaa because of concerns about the federal budget deficit, heightening investors’ concerns about the state of the U.S. economy. Traders also sought a hedge against uncertainty as the U.S. Congress debated President Donald Trump’s large tax bill.
The credit downgrade has pressured the dollar over the past few days, making dollar-denominated gold a more attractive investment to holders of other currencies. The yellow metal is also a traditional hedge against geopolitical and economic uncertainty.
June gold futures soared 1.6% Tuesday to settle at $3,284.60 an ounce on Comex, and the front-month contract rose 3.1% in the first two days of the week. Bullion increased 5.4% in April after gaining 11% in March and adding 0.5% in February. It’s up 24% so far this year. The metal rose 27% in 2024, its biggest annual gain since 2010. The June contract is currently up $22.10 (+0.67%) an ounce to $3306.70 and the DG spot price is $3306.60.
Investors also continued to watch for signs on the Federal Reserve’s plans for monetary policy. Earlier this month, the central bank left interest rates unchanged again at 4.25% to 4.50%.
Most investors tracked by the CME FedWatch Tool now expect the Fed to begin interest rate cuts in September, not the next two scheduled policy meetings in June and July. Lower interest rates are typically bullish for gold, making the yellow metal a more attractive alternate investment.
The Fed held rates at policymakers’ meetings this year after reducing them three times in 2024. The central bank began raising interest rates in March 2022 to fight inflation, ultimately imposing increases of by 5.25 percentage points before beginning rate cuts last year. Previously, the Fed had kept rates at 5.25% to 5.50% for a year.
St. Louis Fed President Alberto Musalem said Tuesday in Minneapolis that tariffs imposed by Trump’s administration since the start of the term will likely weigh on the U.S. economy and weaken the labor market. He added that the Fed should keep up “the fight against inflation.”
Atlanta Fed President Raphael Bostic told CNBC on Monday that he would prefer to cut interest rates just once this year because of the economic effect of Trump’s tariff policy. Earlier this year, the central bank had anticipated two rate cuts this year.
Front-month silver futures gained 2.1% Tuesday to settle at $33.17 an ounce on Comex, and the July contract increased 2.5% so far this week. Silver dropped 5.2% last month after advancing 9.9% in March and retreating 2.4% in February. It gained 21% in 2024. The July contract is currently up $0.206 (+0.62%) an ounce to $33.380 and the DG spot price is $33.25.
Spot palladium advanced 3.8% Tuesday to $1,025.50 an ounce and rallied 6.3% in the first two days of the week. Palladium fell 4.9% last month after rising 7.3% in March and retreating 10% in February. Palladium dropped 17% last year. Currently, the DG spot price is up $13.40 an ounce to $1037.50.
Spot platinum rose 4.2% Tuesday to $1,053.10 an ounce and gained 6% in the first two days of the week. Platinum retreated 3.1% in April after increasing 6.7% in March and sliding 4.7% in February. Platinum lost 8.4% in 2024. The DG spot price is currently up $16.80 an ounce to $1072.20.
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