May 22, 2024
New Delhi, India
Gold Prices(XAU/USD)
Gold prices (XAU/USD) climbed for the fourth consecutive session on Thursday, reaching their highest level in nearly two weeks during Asian trading hours. The sustained rally is being driven by a mix of mounting US fiscal concerns, renewed geopolitical tensions, and growing expectations of interest rate cuts by the Federal Reserve.
Investor nerves have been rattled following Moody’s downgrade of the US sovereign credit rating from its top-tier “Aaa” last Friday. The downgrade reflects fears that the sweeping tax and spending bill—dubbed “One Big, Beautiful Bill”—advanced by the Republican-controlled House Rules Committee could significantly inflate the US deficit, potentially adding between $3 trillion and $5 trillion to the nation’s debt burden.
Further spooking markets was Wednesday’s weak auction of 20-year US Treasury bonds, signaling waning investor appetite for American assets amid deepening concerns about the country’s fiscal outlook.
Weaker Dollar Adds More Shine to Gold
The US Dollar remains under pressure near a two-week low, as markets increasingly bet on further rate cuts from the Fed in 2025. Cooling inflation and a weakening growth outlook have cemented expectations that the central bank will ease monetary policy, which in turn supports the non-yielding gold.
Adding to the pressure on the greenback is the risk-off sentiment stemming from global tensions. China’s Commerce Ministry sharply criticized recent US export control measures, calling them “unilateral bullying” after Washington warned firms against using Huawei’s Ascend AI chips. Beijing’s accusations of Geneva trade rule violations have reignited fears of a fresh wave of US-China trade hostilities.
Geopolitical Risks Deepen Flight to Safety
Safe-haven demand for gold has also been lifted by rising geopolitical turmoil. In the Middle East, Israel continues its military operations in Gaza, worsening humanitarian conditions. Meanwhile, former US President Donald Trump has reportedly told European leaders that Russian President Vladimir Putin has no intention of ending the Ukraine war, believing he is still in a position of strength.
Looking ahead, investors will closely watch upcoming flash PMI readings for insights into global economic health. In the US, weekly jobless claims and existing home sales data are due later in the day and could influence both the USD and gold’s next directional move.
For now, the combination of fiscal instability, weakening US dollar, and escalating geopolitical risks continues to bolster demand for gold, reinforcing its traditional role as a safe-haven asset.
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