Gold miners gain as Moody's downgrades US credit rating
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The news: Three of the top 10 best-performing ASX 200 stocks were gold miners, buoyed by rising gold prices following a credit downgrade of the US by Moody’s Ratings.
The numbers: Despite materials being the worst-performing sector (down 1.18%), Bellevue rose 3.14%, Newmont gained 3.05% and Westgold was up 2.55% by 11:20am AEST. Spot gold increased 0.68% to USD3,225.
The wider ASX 200 was down 0.31%.
The context: Moody’s downgraded the US government’s long-term issuer and senior unsecured ratings from Aaa to Aa1, and revised the outlook from stable to negative.
The agency cited elevated debt and interest payment ratios, which it said were significantly higher than those of similarly rated sovereigns.
Moody's noted that successive US administrations and congress had failed to agree on measures to reverse large annual fiscal deficits and growing interest costs.
What they said: “We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration. Over the next decade, we expect larger deficits as entitlement spending rises while government revenue remains broadly flat,” Moody’s said
“In turn, persistent, large fiscal deficits will drive the government's debt and interest burden higher. The US' fiscal performance is likely to deteriorate relative to its own past and compared to other highly-rated sovereigns.”
The source: Moody's media release
