Gold and Silver Futures Rise After U.S. Government Credit Rating Downgrade

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.

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