Gold prices surged late Friday after rating agency Moody’s downgraded the U.S. sovereign credit rating by one notch, lifting the precious metal back above $3,200 an ounce to close the week.
Moody’s lowered the U.S. long-term credit rating from Aaa to Aa1, citing mounting debt levels and rising interest costs. The agency also revised its outlook for the U.S. from “negative” to “stable,” indicating less risk of further downgrades in the near term.
“This one-notch downgrade on our 21-point scale reflects a decade-long increase in government debt and interest burdens, now significantly higher than those of similarly rated countries,” Moody’s said in its statement.
The move comes despite ongoing efforts by the Department of Government Efficiency, led by Tesla CEO Elon Musk, which had promised $2 trillion in budget cuts. According to available data, however, less than $100 billion in verified savings has been achieved so far.
Looking ahead, Moody’s sees little chance that major structural reforms will be implemented. “Successive U.S. administrations and Congress have failed to reach consensus on reversing the trend of large fiscal deficits and interest costs,” the agency said.
Although markets had little time to react before the weekend, the announcement triggered a swift move into safe-haven assets. Gold rebounded firmly, closing above $3,200. Treasury yields ticked higher, and U.S. stock index futures wobbled in after-hours trading, reflecting increased investor caution.
The downgrade marks a critical turning point as Moody’s was the last major agency to maintain a top-tier Aaa rating for the United States. Back in late 2023, Moody’s had already lowered its outlook to negative amid growing fiscal concerns.
The ratings shift may have long-term implications for the U.S. government’s borrowing costs and could affect global confidence in U.S. debt markets and the U.S. dollar.
