Gold is the Safe-Haven of Choice with U.S. Debt Back in Focus
David Erfle
Friday May 23, 2025, 09:27 EST
Kitco Commentaries | Opinions, Ideas and Markets Talk
Late last Friday, Moody's Investment Service joined all the other credit rating agencies in downgrading U.S. debt from Aaa to Aa1, limiting some super-safe money funds from investing in America.
The move also signals the formerly risk-free U.S. debt market is no longer risk-free, and that gold is now the lone safe-haven of choice.
Following a healthy 11% correction from an extreme overbought all-time high at $3500, Gold Futures reacted in kind this week, moving above initial resistance at $3300.
Geopolitical concerns, a growing sovereign debt crisis, and
evidence of stagflation setting in during an ongoing trade war have been the principal drivers for gold becoming the safe-haven of choice.
Looking ahead, Moody’s said it sees little hope that government spending will materially change. At the current trajectory, the
nearly $37 trillion deficit is expected to advance from 5.4% of GDP in 2024 to around 9% by 2035.
The agency believes the U.S. still offers “exceptional credit strengths,” but debt and payment ratios are now “considerably higher than those of similarly rated sovereign entities.”
As interest rates remain over 4%, the government pays an astronomical fee to simply service its debt, with projections from the Congressional Budget Office (CBO) for 2025 slated to be $952 billion as the Trump administration seeks to extend tax cuts.
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