Gold prices on a strong start as Moody’s lowers US credit rating

Gold prices increased 0.42 percent during Sunday's Asian trading session
Gold prices on a strong start as Moody’s lowers US credit rating
Investors consider gold as safe-haven asset

As Moody’s changed its outlook on the US debt from “stable” to “negative” late Friday, investors are turning to precious metals such as gold, with gold prices demonstrating a positive start. 

Investors react to downgrade

At the beginning of the Asian trading session on Sunday, December gold was trading at $1,945.90 an ounce. It increased 0.42 percent during the day. This development in gold prices marks a positive start to the week. 

Explaining the downgrade, Moody’s cited domestic political instability, including Congress’s failure to pass legislation to fund the government beyond November 17.

An upsetting US Treasury auction of $24 billion in 30-year bonds further influenced the downgrade. In the auction, primary dealers had to accept 24.7 percent of the debt. This is more than double the 12 percent average for the past year. 

Moody’s latest credit rating news follows Fitch’s downgrade in the US long-term rating to AA+ in August due to sovereign debt concerns.

Read: Gold prices soar as investors seek safe haven

Gold and silver futures

Meanwhile, gold and silver futures traded in the red on November 13. MCX gold futures for December 5 were down 0.15 percent at $716.3 per 10 grams. Meanwhile, silver futures (for the same date) decreased 0.81 percent at $833.9 per kg. 

Gold and silver futures are financial contracts that obligate the buyer to purchase, or the seller to sell, a certain number of the said precious metals at an agreed-upon price on a future date. 

“Gold could start the week with a range-bound trade as a cautious tone persists ahead of crucial inflation numbers from the US due tomorrow, which is expected to provide more clues on the path of the Fed for further monetary tightening ahead,” shared Neha Qureshi. She is a senior technical and derivative research analyst at Anand Rathi Commodities & Currencies.

She added, “Retail sales numbers are due later in the week to also provide further direction. Overall prices are expected to find major supports near $ 1930 per ounce in a spot during the day.”

gold prices


Experts’ recommendations

Furthermore, Qureshi recommends selling gold December futures on the rise at $716.7 with a stop loss at $720.3 and a target price of $710.7. For silver December futures, she recommends selling on the rise at $834.3, with a stop loss of $846.3 and a target of $816.3.

Meanwhile, Amit Khare, advises traders to book longs and consider fresh short positions in gold and silver near given resistance levels. He is an associate vice president at Ganganagar Commodity Limited (GCL) Broking.

He sees support for gold December futures at $715.5/$713 and resistance at $719/$721.5. For silver December futures, he sees support at $833/$827 and resistance at $843.9/$854.7.

“Bullion is showing some profit booking. So traders are advised to book their longs and can make fresh short positions in Gold and Silver near the given residence level one with the stop loss of resistance level,” said Khare.

Global market

In the international market, COMEX gold remained flat at $1,938.8 per ounce. Praveen Singh suggests that gold may decline further to $1,900, with US CPI inflation data being crucial. Singh is an associate vice president at Fundamental Currencies and Commodities at Sharekhan by BNP Paribas.

Support is seen at $1,923/$1,900, and resistance is at $1,945/$1,960/$1,970, he added.

Back on October 19, gold prices nearly hit an all-time high in two and a half months. Specifically, it surged over $4 in spot trading. At the time, the yellow metal rose by 0.22 percent, reaching $1,952.07 per ounce. Meanwhile, gold futures for December 2023 declined by 0.24 percent, settling at $1,963.9 per ounce.

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