The market received a small shock yesterday after the close when credit ratings agency Fitch lowered the U.S. debt rating to AA+ from AAA. The last time this happened was in early August 2011, four days after the Congress had raised the debt-ceiling. The market had already been selling off into this expected news as the S&P 500 chart from 2011 shows below, but cascaded lower from there in a brutal sell-off.
Back then, gold was already in an uptrend but posted a sharp rally from $1662.50 an ounce to $1917.90 an ounce in twelve trading days following the Fitch downgrade. This time around, while the market was perhaps blindsided a bit by yesterday’s news, gold has barely budged. This speaks to the fact that underlying conditions are somewhat different from what they were in 2011 after only two years of this new Fed experiment known as QE.
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