The U.S. Senate passes the "Too Big to Fail" bill, raising concerns over the fiscal deficit and triggering a surge in gold prices
The U.S. Senate passed Trump's "Big and Beautiful Act," which is expected to increase the fiscal deficit by more than $3 trillion over the next decade, leading to a significant rise in gold prices. Gold futures prices rose by more than 1%, closing at $3,336.70 per ounce, marking the largest single-day increase since June. The U.S. dollar exchange rate fell, and Treasury yields declined, with the market anticipating that the Federal Reserve will lower interest rates, further enhancing the appeal of gold. HSBC has raised its gold price forecasts for 2025 and 2026 to $3,215 and $3,125, respectively
According to Zhitong Finance APP, on Tuesday, gold futures prices surged over 1% as investors flocked to safe-haven assets following the U.S. Senate's passage of President Trump's tax and spending bill. Analysts expect that the bill will increase the U.S. fiscal deficit by more than $3 trillion over the next decade. The spot gold for July delivery on the New York Commodity Exchange closed up 1.3% at $3,336.70 per ounce, marking the largest single-day dollar and percentage gain since June 13; July spot silver futures closed up 0.6% at $36.082 per ounce.
Marex analyst Edward Meir stated in a report, "The recently passed budget bill provides support as it appears it will lead to a $3 trillion fiscal deficit over the next 10 years. This will increase the debt burden we need to repay, requiring more financing and more borrowing, all of which are favorable for a stronger gold market."
The dollar index hit a three-and-a-half-year low overnight, while U.S. Treasury yields also declined, further reinforcing expectations that the Federal Reserve will eventually lower interest rates, which typically increases the appeal of non-yielding gold.
The market currently expects at least two rate cuts by 2025. Analysts believe that the U.S. employment data to be released on Thursday will play a key role in determining the Fed's policy direction.
Meanwhile, trade uncertainties will continue to persist, and the dollar has ended its worst first half since 1973—both factors support the demand for gold as a safe-haven asset.
Partly due to the continuous rise in U.S. government debt, HSBC analysts have raised their average gold price forecast for 2025 from $3,015 per ounce to $3,215 per ounce, while also increasing the forecast for 2026 from $2,915 per ounce to $3,125 per ounce.
The bank wrote, "Gold prices are expected to fluctuate between $3,100 and $3,600 per ounce for the remainder of this year, with a price of $3,175 per ounce at the end of 2025 and $3,025 per ounce at the end of 2026."
