Security Rating Downgrade and Contracting US Economy Bolsters Demand for Safe-Haven Gold

The Gold Spot Price (XAUUSD) rose after Fitch downgraded the United States’ security rating from AAA to AA+ due to financial deterioration. This downgrade highlights the pressing issue of government spending and the unsustainable US debt, posing the risk of further downgrades unless addressed promptly. 

Additionally, the US faces a busy week of macroeconomic data. The S&P Global Manufacturing PMI aligned with forecasts, increasing from 46.3 to 49, while the ISM Manufacturing PMI rose less than expected, reaching 46.4 from 46 instead of the predicted 46.8. Although the manufacturing PMIs show slight increases, the US economy remains in a contracting phase. With the upcoming ISM Services PMI, Factory Orders, and labour market data, the Greenback could see further depreciation while the demand for safe-haven gold teeters in anticipation. 


A downward trend was in motion as the swing highs struggled to gain upside traction towards the $1987.56 per ounce major resistance. However, the Gold Spot Price ticked up slightly due to a struggling Greenback, which could encourage an upward trend as demand begins to tick up. If the price action breaks out from the 38.20% Fibonacci level, the $1971.33 per ounce level may be a point of interest in furthering an upward trend.  

However, the Spot Price could fall short of the $1971.33 per ounce resistance, which may promote the continuation of a downward trend towards the $1943.47 per ounce support at the 50% level. Where a breakdown of the 50% level occurs, the price action could succumb to lower levels of support at the Golden Ratio or the $1899.38 per ounce major support, respectively. 


The Gold Spot Price edged higher on the backdrop of a struggling US economy. If the leg-up sustains an upward trend, the $1971.33 per ounce resistance may be a point of interest for a reversal. However, the price action may fall short of this resistance which may encourage a pullback towards the $1943.47 per ounce support. 

Sources: TradingView, Reuters, Trading Economics 

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