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Fed rate cuts and safe-haven demand drive gold to all-time high

Gold reached a new record on Tuesday, as there was no sign of an end to the impasse that led to the government shutdown between the two chambers of the U.S. Congress. Near-certainty bets about a Federal Reserve interest rate cut in this month also provided support.

Gold spot was up 0.1% to $3,965.39 an ounce at 0308 GMT after reaching a session high of $3977.19 earlier. U.S. Gold Futures for December Delivery gained 0.3%, to $3988.10.

Kelvin Wong, senior market analyst at OANDA, said: "The (chances) of October and December cuts remain above 80%. This is actually supporting the gold price and this government shutdown too given that there's still no resolution reached between the two U.S. Congress sides."

Jeff Schmid, Kansas City Fed Bank president, has indicated that he does not intend to further cut interest rates. He said the Fed should focus on the dangers of high inflation and not just apparent weakness in job markets.

According to CME FedWatch, markets are still pricing additional 25 basis point rate cuts for both October and December, with probabilities 95% and 83% respectively.

Gold that does not yield is a good investment in low-interest rate environments and economic uncertainty.

The gold price has increased by 51% this year, mainly due to central bank purchases and the demand for Exchange-Traded Funds (ETFs) backed by gold. A weaker dollar also helped. Retail investors are increasingly interested in hedging their positions amid increasing trade and geopolitical tensions.

Goldman Sachs increased its December 2026 forecast for gold to $4.900 per ounce, up from $4.300, on Monday. It cited strong Western exchange traded fund (ETF), and central bank purchases.

Silver spot fell by 0.1% at $48.49 an ounce. Platinum dropped 0.4% to $1.619.62, and palladium increased 0.1% to 1,325.71. (Reporting by Ishaan Arora in Bengaluru; Editing by Subhranshu Sahu and Sonia Cheema)

(source: Reuters)