Gold prices are attempting to rebound following last week’s losses, as traders closely monitor developments in the US economy, including Federal Reserve statements and ongoing trade negotiations. Amid these uncertainties, gold is caught between safe-haven demand and pressure from rising Treasury yields. This article examines the key fundamental and technical factors influencing gold’s near-term outlook.
US Credit Downgrade Spurs Safe-Haven Demand
Fundamentally, gold’s cautious optimism is driven by the recent downgrade of the US sovereign credit rating by Moody’s, which lowered the rating from “Aaa” to “Aa1.” This shift reflects concerns over the nation’s $36 trillion debt and rising costs of debt servicing. Uncertainty over President Donald Trump’s trade policies further complicates the economic outlook.
The downgrade has weakened both the US Dollar and Treasury bonds, rekindling safe-haven demand for gold. However, rising Treasury yields driven by economic concerns are limiting gold’s momentum above the $3,200 mark.
Treasury Secretary Scott Bessent escalated trade tensions with a tariff warning on Sunday, indicating tariffs could revert to previous levels if trading partners fail to negotiate in good faith. This stance adds further support to gold amid market uncertainty.
Mixed Economic Data Adds Complexity
Recent US economic data presents a mixed picture. The Producer Price Index (PPI) unexpectedly declined, retail sales growth slowed, and the Consumer Price Index (CPI) rose less than expected. These indicators point to economic weakness and reinforce fiscal concerns that support gold.
Positive news on trade agreements or hawkish signals from central banks could limit gold’s near-term gains. As a result, the metal remains exposed to risks on both the upside and downside.
Technical Outlook: Ascending Trend Line Holds Key
Technically, gold has respected an ascending trend line since early 2025, which has served as a strong support level through multiple tests. Recently, gold dipped near this line but recovered above the $3,100 area, confirming the trend’s resilience.
The chart shows a series of higher lows, a hallmark of a sustained uptrend, despite a recent pullback from highs above $3,500. Holding above $3,200 suggests bulls retain influence, but a sustained break below the trend line could prompt a sharper decline.
Currently, price action indicates consolidation and indecision, with traders closely watching whether gold can maintain support for a fresh rally. Until a break below this key level, the technical outlook favors a bullish bias.
Conclusion
In summary, gold’s near-term direction is shaped by a balance of fundamental and technical factors. Fiscal worries, notably the US credit downgrade and rising yields, provide safe-haven support. However, trade developments and central bank hawkishness could cap gains. The price is currently testing a critical support trend line, and holding above it would support further upside. Failure to do so may trigger a larger correction. Traders should approach the coming weeks with caution, monitoring key economic and technical signals closely.
