Gold prices drifted higher on Monday, steered by a softer dollar and safe-haven demand after Moody's downgraded the U.S. government's credit rating. Spot gold rose 0.9% to $3,229.51 an ounce by 1315 ET (1715 GMT).

Gold price rises as dollar weakens, Moody’s downgrade fuels demand. Traders eye breakout above $3,238 for bullish momentum in XAU/USD.

Gold buyers need acceptance above the 21-day SMA at $3,289 on a daily candlestick closing basis for a sustained uptrend, The next topside target is at the falling trendline resistance at $3,387, above which the $3,400 level will be threatened.

Gold prices rose on Wednesday to their highest levels in a week as the dollar weakened and investors sought safety amid U.S. fiscal uncertainty, with Congress debating a sweeping tax bill.

Gold prices edged higher on Monday, finding support from escalating concerns over the US economic outlook and its burgeoning budget deficit, which bolstered the appeal of traditional haven assets.

So, Moody’s downgraded U.S. sovereign credit rating from AAA to AA1, which means that the U.S. debt is no longer top-rated. This was the last of the major agencies to cut this rating. What does it change?

The debt downgrade does nothing to impair the reserve currency status of the U.S. dollar. Given the massive short position on U.S. Treasuries, bond buyers could see a significant drop in yields and a rise in bond prices, particularly if this coincides with the onset of a recession or Fed rate-cutting cycle.