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 prices advance by over 0.50% and remain above the $3,300 mark as traders grow increasingly nervous about the United States (US) tax bill vote, along with escalating tensions in the Middle East. XAU/USD trades at $3,307 after bouncing off a daily low of $3,285.

Gold prices surged as political tensions in the U.S. and a weakening dollar drove investors toward safer assets. Uncertainty around President Trump's tax bill and concerns over national debt further fueled the rally.

Investors will get the first chance to react to Moody’s downgrade of the U.S. credit rating late Friday over rising government debt and they’ll also look for more progress from President Trump on trade deals as the week kicks off.

Gold prices will be supported by geopolitical tensions and continued central bank purchases. Consider adding NEM, AEM, B, KGC and NGD stocks to your portfolio.

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

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.

U.S. stocks finished near the unchanged mark on Monday with market sentiment weakened by the downgrade of the federal government's perfect sovereign credit rating owing to its huge debt profile.