U.S. Credit Rating Downgrade Triggers Gold Pullback

Market Overview

Last Friday's economic data revealed a rebound in U.S. import prices for April, while consumer sentiment for May remained subdued. The U.S. Dollar Index dipped initially but later recovered to close up 0.18% at 100.99. Spot gold saw a sharp intraday decline of over 2%, hitting a low of $3,154.29, before paring some losses to end the day at $3,202.27 per ounce, down 1.18%. It marked the worst weekly performance since November 2023. Spot silver also lost ground, falling 1.1% to close at $32.26 per ounce. However, gold surged on Monday, approaching the $3,240 level, as markets reacted to Moodys downgrade of U.S. credit.

Hot Topics to Watch

● Moodys Cuts U.S. Credit Rating to Aa1 Amid Fiscal Concerns; Stocks and Bonds Decline After Hours

Citing ballooning federal deficits, Moodys Investors Service downgraded the U.S. long-term credit rating from Aaa to Aa1 and revised the outlook from “negative” to “stable.” This move means all three major rating agencies have now downgraded the U.S. Previously, similar actions by S&P Global and Fitch triggered notable equity sell-offs.

● University of Michigan Consumer Sentiment Hits Second-Lowest Level Ever as Inflation Expectations Surge

The University of Michigan's preliminary May survey showed 1-year inflation expectations soaring to 7.3%—the highest since 1981—and 5-year expectations rising to 4.6%, a 33-year high. Consumer assessments of current financial conditions dropped to their weakest since 2009, with future expectations also hitting record lows. The survey was conducted between April 22 and May 13. On May 12, following U.S.-China trade talks in Geneva, both nations jointly announced a temporary tariff reduction.

Key Events to Watch

• 17:00 GMT+8: Eurozone April Final CPI YoY

• 17:00 GMT+8: Eurozone April Final CPI MoM

• 20:45 GMT+8: Speech by FOMC Permanent Voter and New York Fed President John Williams

• 22:00 GMT+8: U.S. April Conference Board Leading Index MoM

• Throughout the day: President Trump holds calls with Russian President Putin, Ukrainian President Zelenskyy, and NATO allies