Gold prices jumped on Thursday, May 23, as investors reacted to a major downgrade of the U.S. government’s credit rating by Moody’s. The downgrade raised fresh concerns about America’s growing debt burden, weakening the U.S. dollar and driving demand for gold as a safe-haven asset.
Gold Prices Climb at Home and Abroad
In India, gold futures for June 5 delivery on the Multi Commodity Exchange (MCX) rose 0.67%, reaching ₹96,235 per 10 grams. Internationally, gold gained nearly 1%, marking its highest price since May 9.
The rise followed Moody’s decision to lower the U.S. long-term issuer and senior unsecured ratings from AAA to AA1. The agency pointed to rising debt and weakening fiscal strength. This news led many investors to shift their money into gold, which is often seen as a secure investment in uncertain times.
U.S. Fiscal Concerns Fuel Safe-Haven Demand
Market worries deepened further after reports on a tax and spending proposal from former President Donald Trump. The bill, under review in Congress, could add up to $3.8 trillion to the national debt, which is already at $36 trillion, according to Reuters. The possible increase in government spending has made investors more nervous about the U.S. economy’s long-term stability.
“Gold tends to do well when people are worried about inflation or the economy,” said Rick Kanda, Managing Director at The Gold Bullion Company. “With this credit downgrade and fears of financial mismanagement, conditions are right for gold to rise.”
Long-Term Investment Over Short-Term Timing
While some investors try to profit from short-term changes in gold prices, Kanda warns against this approach. “Investing in gold shouldn’t be based on whether the market is going up or down today,” he said. “It’s about being ready financially and focusing on your long-term goals.”
He also advised against selling during minor price drops. “Short-term declines are normal,” he said. “Gold should be held through market ups and downs. Don’t let daily price swings scare you into selling.”
Gold’s Performance and Future Outlook
Gold has performed strongly in the past year. Prices are up more than 40% compared to the previous year, with a record high of over £2,630 per troy ounce reached last month. That level even topped the inflation-adjusted highs from 1980.
Still, Kanda reminded investors that gold is not always stable. “Even though gold is considered a safe asset, it can still be volatile,” he said. “Past performance doesn’t guarantee future returns.”
Despite this, he believes the long-term outlook for gold remains strong. “People want real, tangible assets right now,” Kanda explained. “Central banks are still buying gold, which is tightening supply and driving prices higher. Investors are choosing gold over cash, which is pushing demand up even more.”
Could Gold Hit $4,000?
Looking ahead, Kanda sees more room for gold to grow. He believes that if current economic trends continue, gold could reach $4,000 per ounce. “Confidence in the system is weakening. That’s why investors are turning to gold. I think $4,000 by the end of 2025 is very realistic—maybe even likely,” he said.
He compared the current environment to past financial crises but said this one could be larger. “There’s a shift happening. People and governments are choosing gold to protect their money. We could be at the beginning of a long gold rally.”
As worries about U.S. debt rise, gold supply remains tight, and both institutional and central bank interest grows, many experts agree that gold could see strong gains in 2025. For those who focus on the long term and aren’t discouraged by short-term price swings, gold continues to be a powerful hedge against uncertainty.
Related topics:
