Gold Rises Amid Weak US Dollar And Budget Deficit Concerns

(RTTNews) - Gold continued to gain modestly for the second consecutive day on Tuesday as the impact of a slowing US economy and concerns about an increase in national debt due to a new tax bill, weighed down on the US Dollar which lifted up the safe-haven metal.

Front Month Comex Gold for July delivery gained $42.30 (or 1.28%) to $3336.70 per troy ounce today.

Front Month Comex Silver for July delivery gained 23.00 cents (or 0.64%) to $36.082 per troy ounce today.

Gold enjoyed a favorable rally after Israel attacked Iran last month, resulting in a 12-day war between two nations. A ceasefire announcement on June 24 by US President Donald Trump between the two countries continues to linger without any adverse events.

However, gold price sustained its level as macroeconomic factors including trade negotiations between US and its trading partners as well as the progress of Trump's sweeping tax and spending bill (with a projected $3.3 trillion impact on debt) have come into play. Trump aims to have the bill passed before July 4.

Last week, the data on inflation and food price as well as the jobs data indicated a slowdown in the economy.

Today, the ISM Manufacturing PMI data revealed the index edging up to 49 in June from 48.5 in May indicating a slowly contracting activity in the manufacturing sector.

Separately, JOLTS data revealed the number of job openings increased by 374,000 to 7.769 million in May, above market expectations.

On the monetary front, investors are anticipating an interest rate cut as it could boost the economy. However, last week, the US Fed's Chairperson Jerome Powell had expressed a "wait-and-watch" attitude before making a decision.

Today, speaking at a conference in Portugal, Jerome Powell stated that the looming threat of a global trade war stopped the Fed from slashing interest rates. Notably, Trump had openly expressed his disappointment with him and indicated a replacement sooner.

On the trade front, Canada rescinded the taxes on American technology companies late Sunday after Trump expressed his displeasure last Friday. Canadian finance ministry announced that leaders of both nations are in talks to close a deal by July 21. This news revived Canadian markets.

The US and China are already on the verge of signing a trade deal soon, outlined on a new framework agreed last week between both nations on the basis of their Geneva agreement.

Trump also announced that a new deal is coming up between US and India.

As the July 9 deadline set by Trump for tariff negotiation is approaching soon, analysts believe that data coming up this week including a series of US labor market reports could provide more clues on the Fed's policy path which would impact the USD and yellow metal.