Gold Soars as US Downgrade & COVID Fears Ignite Safe-Haven Demand

Gold gained momentum as demand for safe-haven assets increased. It hit an intraday high of $3240  and is currently trading around $3237.

Moody's downgrade on May 16, 2025, of the Aaa rating of the U.S. sovereign credit rating to Aa1, coupled with a rise in COVID-19 cases, has led to an unprecedented surge in the price of gold. Moody's downgrade, triggered by fears of rising $36 trillion government debt and persistent fiscal deficits, has created market uncertainty and investors' risk aversion. Consequently, Treasury yields have risen, with more than 5% 30-year yields and more than 4.5% 10-year yields, reflecting concerns about borrowing costs and fiscal sustainability.

Against this backdrop of increased economic stress and geopolitical turbulence, investors have found safe havens in such safe-haven assets as gold. The peak in COVID-19 has amplified fear of economic disruption, supply chain disturbances, and potential inflationary pressure, lending strength to the call for gold as an asset of value. The duo of fiscal fear from the downgrade and uncertainty regarding the pandemic has triggered heightened demand for gold, driving up its price as investors seek insurance against volatility and currency exposure

Rate Hike Expectations: Market Sentiment Shifts

According to the CME Fed Watch tool, the chances of  rate pause in June 18th 2025 meeting have increased to 91.40% from 91.60% a week ago.

Technical Analysis: Key Levels and Trading Strategy

Gold prices are holding below  short term moving average 34 EMA and above 55 EMA and  above long-term moving averages (200 EMA) in the 4-hour chart. Immediate support is at $3200 and a break below this level will drag the yellow metal to $3165/$3135/$3100/$3000. The near-term resistance is at $3250 with potential price targets at $3265/3279/$3300/$3365/$3378/$3400/$3415/$3465/$3500.

It  is good to buy on dips around $3225  with a stop-loss  at $3200 for a target price of $3300.