Gold prices surged to a near two-week high of $3,345 during Asian trade on Thursday.
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The rally was driven by strong safe-haven demand amid deepening concerns over U.S. fiscal stability and a weaker U.S. dollar. The metals rally accelerated after Moody’s downgraded the U.S. sovereign credit rating from Aaa to Aa1.
The downgrade cited structural fiscal weaknesses and long-term debt sustainability issues. Markets also reacted to the House Rules Committee’s approval of a tax-and-spending bill. The bill is projected to add between $3 trillion and $5 trillion to the federal deficit.
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Treasury auctions have struggled as well. Wednesday’s 20-year bond sale saw tepid demand, reflecting waning confidence in U.S. debt markets.
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The U.S. Dollar Index (DXY) slipped to a two-week low as expectations for Federal Reserve rate cuts in 2025 gained traction.
Softer inflation data and stagnating retail sales have led markets to price in a more dovish monetary policy path. “With growing uncertainty around U.S. fiscal policy and weakening macro indicators, safe-haven flows are likely to persist,” noted a senior commodities analyst in Singapore.
Gold rises on fiscal instability
Beyond the U.S. fiscal story, renewed trade friction between Washington and Beijing has added to investor caution. China’s Ministry of Commerce sharply criticized U.S. restrictions on AI chip exports, accusing the U.S. of economic coercion. Market participants see this escalation as a threat to already fragile global supply chains.
Meanwhile, ongoing geopolitical tensions in Eastern Europe and the Middle East continue to fuel demand for precious metals. Gold eyes a breakout above $3,346 but looks stretched short term. Silver tests $33.69, with $34.16 next if bulls maintain control above key moving averages.
Gold (XAU/USD) is poised to break above the $3,346 level, though technical indicators suggest a possibility of short-term overextension. Silver (XAG/USD) is trading at $33.49 after breaking out above a multi-week descending trendline and reclaiming key resistance at $33.24. The breakout is supported by a sustained move above both the 50-EMA ($32.77) and 200-EMA ($32.61), reinforcing the bullish trend.
Price action is now challenging the $33.69 resistance—last seen in mid-April—as bulls attempt to extend the rally. If silver closes above $33.69, the next targets are $34.16 and $34.59. However, if price falters, a pullback toward $33.24 or even the trendline breakout around $32.70 could be in play.