The United States No Longer has AAA Rating. What's That Impact on the Price of Gold?

Gold reaffirms its role as a safe haven following historic news: for the first time in over a hundred years (1917), the United States has lost its perfect credit rating. This fiscal alarm bell in the world's largest economy further strengthens the precious metal's relevance in the face of growing global economic uncertainty.

The three major international rating agencies —Moody's, Standard & Poor's, and Fitch— have withdrawn their highest credit ratings from the United States. This historic event reflects significant fiscal deterioration and weakens the strength of the once "almighty dollar," leaving the country outside the exclusive group of nations with perfect ratings, which include Australia, Germany, Canada, Denmark, Sweden, Switzerland, Singapore, Norway, the Netherlands, and Luxembourg.

The United States is no longer part of the exclusive group of nations with perfect ratings

The Fiscal Deterioration of the United States

The US credit downgrade reflects an alarming fiscal outlook characterized by several key factors. First, the persistent fiscal deficit reached 6.9% of the Gross Domestic Product (GDP) in 2024, due to its high and ever-increasing public spending, in addition to insufficient tax revenues. As a result, the debt of the United States has reached record numbers, exceeding US $36 trillion in May 2025, representing more than 120% of its GDP.

Moody's warned that if the current trends continue, the federal debt could exceed 130% of the GDP by 2035, whereas the interest payments could absorb up to 30% of the government’s revenues. This structural pressure is exacerbated by the lack of effective tax reforms by Congress, which has undermined the institutional credibility of the United States. 

Added to this situation is the approval of the new fiscal package promoted by the Trump administration, known as“The Big, Beautiful Bill”, which includes deep tax cuts without clear compensatory measures. According to the Congressional Budget Office, this new package could add US$4 trillion more to the national debt. The timing of its passage—just after Moody's downgrade—has been criticised by economists and fiscal observers as a sign of a disconnect between policy and the economic reality.

Jamie Dimon, CEO of JPMorgan, has warned that this combination of debt, inflation, and geopolitical tensions could lead the US into a state of stagflation—low growth with persistently high inflation.

Impact on the Markets of Debt

The immediate reaction to the credit downgrade translated into notable volatility in Treasury bonds, causing their prices to fall in view of a weakened demand from investors. As a result, the 10-year bond yields increased above 4%—a record high in more than a decade- and the yield of the 30-year bond surpassed 5.1%, reflecting a loss of confidence among institutional investors, who demand higher returns to offset the growing risk of financing the US government.

This dynamic is a clear warning that the debt market believes the current fiscal policy is making the U.S. economy less attractive—and even risky—as an investment destination.

Impact on the Dollar

A particularly worrying aspect is the simultaneous weakening of the dollar. George Saravelos, head of currency analysis at Deutsche Bank, noted that this depreciation is “a clear sign of a strike by foreign buyers on US assets” reflecting a growing reluctance to finance the country's twin deficits (fiscal and trade) at current price levels.

All this raises concerns about the future of the dollar as the main global reserve currency, which still represents around 60% of global international reserves. Internal political tensions, coupled with a fiscal agenda lacking substantial adjustments, further aggravate this situation.

Gold as a Safe Heaven against Uncertainty

Faced with this fiscal crisis and the loss of confidence in denominated assets dollars, gold is once again positioned as a strategic asset. The strength of gold lies in the fact that its value does not depend on government solvency nor does it deteriorate with inflation, features that are especially valued in contexts of economic uncertainty. Furthermore, its global acceptance and immediate liquidity make it particularly attractive for investors seeking security.

Impact on the Price of Gold

Historically, gold has acted as a refuge in similar crises. At this time, recent US fiscal instability has led gold to a new cycle of appreciation, having increased its price in dollars by 28.4% during 2024, and by 28.02% in the first five months of 2025, exceeding US $3,360 per ounce as of May, 23rd.

If fiscal uncertainty persists and pressure on the dollar remains, financial analysts estimate that the price of gold would reach US $3,700 per ounce towards the end of 2025 or even US $3,880 per ounce in the event of a recession (Goldman Sachs Research, April 2025). The long-term outlook is even more positive for gold, with analysts setting its price at US $4,800 per ounce by the end of this decade (Growth AG, May 2025).

The Price of Gold is Significantly Higher at the End of the Decade

Source: Incrementum, AG

In this context, many institutional investors have begun to reduce their exposure to US Treasury bonds, shifting their positions towards more resilient assets such as gold, as a protection and diversification strategy against increasing risks. The downgrade of the United States' credit rating does not only represent a technical financial adjustment, but the palpable symptom of a profound change in the US economy, with potentially risky consequences for countries whose economies depend on the latter.

Expansionary tax policy, the weakening of the dollar and the loss of confidence in the ability of the United States to cover its debt, show an increase in the perception of risk that could affect the future investment flows towards this nation In this new context, gold reaffirms its strategic relevance by positioning itself as a fundamental long-term investment in the face of financial turbulence.

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