U.S. Senate Passes “Big and Beautiful” Bill, Triggering Surge in Gold Amid Soaring Deficit Concerns

On July 1, the U.S. Senate passed the “Big and Beautiful” tax and spending bill with a vote of 51 in favor and 50 against. The legislation includes provisions to extend the corporate and individual tax cuts initially implemented by President Trump in 2017, exempts tips and overtime wages from taxation, reduces funding for Medicare and nutrition assistance programs, and authorizes hundreds of billions of dollars in spending on border security and defense. Additionally, the bill stipulates that tax credits for electric vehicles will end starting September 30, and only wind and solar projects initiated before the end of 2027 will qualify for tax incentives. Compared with the House version, the Senate bill proposes a higher debt ceiling increase of USD 5 trillion. According to the U.S. Congressional Budget Office, the Senate and House versions are projected to raise the U.S. fiscal deficit by nearly USD 3.3 trillion and USD 2.8 trillion respectively between 2025 and 2034. Changes to Medicaid and the Affordable Care Act in the Senate bill are expected to increase the number of uninsured Americans by nearly 12 million by 2034.

Some Democratic senators criticized the legislation as favoring the wealthy. Senator Bernie Sanders of Vermont described it as “a gift to the billionaire class,” while Senator Gary Peters of Michigan called it “reckless and irresponsible.” Concerns about the sustainability of U.S. fiscal policy have also put downward pressure on the U.S. dollar, with its exchange rate against the euro reaching its lowest level since September 2021. The U.S. Dollar Index fell below 96.50, marking its weakest level since late February 2022. Anna Cieslak, a professor at Duke University, stated that factors such as fiscal deficits, dollar depreciation, uncertainty surrounding the next Federal Reserve Chair, and questions over the Fed’s independence have negatively impacted the dollar’s status as a safe haven currency.

Following the Senate vote, gold futures rose significantly as investors turned to safe-haven assets. Spot gold for July delivery on the New York Mercantile Exchange closed up 1.3% at USD 3,336.70 per ounce, the largest single-day gain in dollar and percentage terms since June 13. July silver futures closed up 0.6% at USD 36.082 per ounce. Marex analyst Edward Meir noted that the budget bill is expected to lead to a USD 3 trillion increase in the U.S. fiscal deficit over the next decade, intensifying the national debt burden and prompting further borrowing and financing, all of which support a stronger gold market. The weakening U.S. dollar and declining Treasury yields have also reinforced expectations of interest rate cuts, which typically enhance the appeal of non-yielding gold. The market currently anticipates at least two rate cuts by 2025, and upcoming U.S. employment data on Thursday is expected to influence the Federal Reserve’s policy direction.

Trade uncertainty remains elevated, and the U.S. dollar has just experienced its worst first-half performance since 1973, both of which are bolstering demand for gold. HSBC analysts, citing rising U.S. government debt, have revised their average gold price forecast for 2025 from USD 3,015 to USD 3,215 per ounce and for 2026 from USD 2,915 to USD 3,125 per ounce. The bank expects gold prices to fluctuate between USD 3,100 and USD 3,600 per ounce for the rest of the year, with a projected year-end price of USD 3,175 in 2025 and USD 3,025 in 2026.