Gold and silver futures experienced slight gains on Wednesday following the downgrade of the U.S. government’s credit rating by Fitch Ratings. This follows Fitch’s earlier warning about a possible downgrade due to the debt ceiling fight in Congress.
Price Action
- Gold futures for December delivery rose by $9.90, or 0.5%, to $1,988 per ounce on Comex.
- Silver futures for September delivery gained 24 cents, or 1%, to $24.57 per ounce.
- Palladium futures for September rose by $1.90, or 0.2%, to $1,239 per ounce.
- Platinum futures for October delivery fell by $3.90, or 0.4%, to $936 per ounce.
- Copper futures declined by 3 cents, or 0.7%, to $3.88 per pound.
Market Drivers
Shortly after the U.S. markets closed on Tuesday, Fitch Ratings announced that it had downgraded the U.S. government’s credit rating from AAA to AA+. The downgrade was attributed to the expected fiscal deterioration in the coming years and the erosion of governance demonstrated by the debt ceiling standoff.
Fitch had previously indicated that a downgrade was being considered. With this decision, Moody’s Investors Service is now the only major ratings agency that assigns the highest rating to U.S. government debt. Standard & Poor’s downgraded the U.S. to AA+ back in 2011.
Although the decision had a modest impact on global financial markets, with stocks and U.S. stock futures sinking, the U.S. dollar and Treasury yields remained relatively stable. However, the price of gold and silver received a boost.
Rupert Rowling, a market analyst at Kinesis Money, noted that Fitch Ratings’ surprise credit rating cut has provided a fresh boost to gold as investors seek out its safe haven qualities in light of the macroeconomic challenges.
