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Gold reaches record highs as bets on rate cuts and the US government shutdown increase demand

Gold prices reached a new record high on Friday, boosted by the expectation of a Federal Reserve rate cut in this month as well as safe-haven demand due to the ongoing U.S. Government shutdown.

By 09:38 am, spot gold had risen 0.6% to $3,887 an ounce. ET (1011 GMT), following a session high of $3.896.49.

U.S. Gold Futures for December Delivery rose by 0.4% to $3.911.80.

In a low interest rate environment, gold, which is viewed as an asset of safety in times of economic and political uncertainty, flourishes. It has increased by 48% this year.

Bob Haberkorn, RJO Futures' market strategist, said that people are buying gold when it dips. With the government shut down the only way gold can go up is upwards.

The U.S. shutdown continued for a second consecutive day on Thursday. This threatened thousands of federal government jobs and could delay the release of key economic data, such as the closely-watched non-farm payrolls report (NFP), due Friday. Also, the weekly unemployment claims report, which is a crucial indicator of the health of the labor market and was due to be released on Thursday, wasn't released.

The ADP National Employment Report released on Wednesday showed that private sector employment in the United States fell by 32,000 last month, after August's decline was revised downwards.

According to CME FedWatch, traders are pricing in an almost certain 25-bps rate cut for this month.

"With trade tensions, tariffs, and geopolitical hotspots not showing any signs of resolution, there is still a favorable environment for the demand for safe havens." The central banks will not abandon their current buying programs, especially given the long-term strategies in place," StoneX stated in a Thursday note.

Gold is Goldman Sachs’ most-conviction commodity recommendation. The bank stated in a Wednesday note that the risks of its forecasts for gold prices at $4,000/oz by mid-2026, and $4,300/oz by December 2026 have increased.

Other than that, silver spot rose by 0.8%, to $47.70 an ounce. Platinum increased 1.4%, to $1,579.05, and palladium remained flat at $1244.75. (Reporting and editing by Noel John in Bengaluru, John Biju)

(source: Reuters)