Metal Heads for Biggest Weekly Gain in Over a Month Amid Credit Rating Downgrade and Debt Explosion
Gold futures soared toward $3,330 per ounce on Friday, cementing what is poised to be the largest weekly gain in over a month, driven by heightened concerns over the US fiscal deficit and the recent Moody’s credit downgrade. As investors grow increasingly wary of the implications of expanding public debt and a weakening dollar, bullion has reasserted its position as a safe-haven asset, climbing nearly 4% this week.
At 2:59 AM EDT, Gold June 2025 contracts (GC=F) traded at $3,330.70, up $35.70 or 1.08%, reflecting renewed momentum in precious metals despite higher Treasury yields. The Bloomberg Dollar Spot Index was down 0.3%, on track for a weekly decline, further bolstering gold’s rally.
Highlights:
Gold prices climb 4% for the week, nearing $3,330/oz.
Follows Moody’s downgrade of US credit rating and concerns over Trump tax policy impact on deficit.
Gold has gained over 25% year-to-date, just $200 below its record high.
Bloomberg Dollar Spot Index posts weekly decline, aiding bullion gains.
Soaring Deficits, Trump Tax Policy Trigger Safe-Haven Rush
Investors are increasingly focusing on US fiscal sustainability, particularly in the wake of Moody’s decision to strip the US of its final AAA credit rating, a move that has reignited debate over the country’s burgeoning debt burden. President Donald Trump’s newly passed tax legislation, approved in the House and now moving to the Senate, is expected to widen the federal deficit, exacerbating long-standing concerns about the country’s financial trajectory.
According to the Congressional Budget Office, the total outstanding US Treasury debt has ballooned from $4.5 trillion in 2007 to nearly $30 trillion in 2025, while the debt-to-GDP ratio has surged from 35% to 100% over the same period. This sharp deterioration has renewed fears of potential credit events or a long-term loss of investor confidence in US sovereign obligations.
Gold, traditionally seen as a hedge against fiscal instability, has responded positively to these developments. Analysts now see continued upside as investors brace for further fiscal slippage.
Highlights:
US debt skyrockets to $30 trillion, with debt-to-GDP ratio at 100%.
Trump’s tax cuts seen as adding fuel to deficit concerns.
Moody’s downgrade underscores growing fiscal stress.
Central Bank Buying and Weakened Yield Correlation Support Bullion
Even as 10-year US Treasury yields rose above 4.5% this week — a level historically considered bearish for non-interest-bearing assets like gold — the inverse relationship between yields and bullion has weakened. This signals that investors are placing greater weight on geopolitical and fiscal risks than on traditional rate dynamics.
Central banks worldwide have remained aggressive gold buyers, looking to diversify reserves away from the dollar and euro in the face of rising global uncertainty. Their consistent purchases have further tightened supply in a market already supported by haven-seeking demand tied to the US-led trade war and fiscal worries.
“Gold is likely to remain range-bound in the near term,” said Justin Lin, analyst at Global X ETFs. “However, ongoing geopolitical tensions and increasing concerns about the US fiscal outlook continue to provide underlying support.”
Highlights:
10-year US yields top 4.5%, but gold rally remains intact.
Central banks continue to accumulate gold, bolstering structural support.
Traditional negative correlation between yields and gold weakens amid fiscal anxiety.
Broader Precious Metals Rally as Platinum Hits Year-High
While gold has taken center stage, the precious metals complex as a whole posted significant gains for the week. Silver, palladium, and platinum all moved higher, with platinum rallying 10% to reach its highest level in over a year. This surge reflects a combination of industrial demand recovery, supply constraints, and investor rotation into undervalued segments of the metals market.
The broad rally adds to signs of increasing investor caution in response to macroeconomic signals, driving flows into real assets as a form of protection against market volatility and potential stagflation risks.
Highlights:
Platinum up 10%, hits 1-year high.
Silver and palladium also gain for the week.
Reflects broader trend toward real assets amid fiscal, geopolitical volatility.
