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Gold continues historic rally and soars above $4,000/oz.

Investors seeking to protect themselves from the increasing economic and geopolitical uncertainties, as well as expectations of future interest rate reductions by the U.S. Federal Reserve, drove gold prices above $4,000 per ounce on Wednesday.

By 0213 GMT, spot gold had risen 0.5% to $4,002.53 an ounce. U.S. Gold Futures for December Delivery gained 0.5% at $4,025 an ounce.

Gold is traditionally seen as an investment during periods of uncertainty. Gold spot is up 52 percent year-to date after rising 27 percent in 2024.

The Fed is likely to continue lowering rates, so the market will be looking for the next round number of 5,000.

There will be bumps along the way, such as a lasting ceasefire in the Middle East or Ukraine, but the fundamental drivers for the trade, massive debt and increasing reserves, diversification of reserve assets, and a lower dollar, are unlikely to alter in the medium-term.

A cocktail of factors has driven the metal's rally, including expectations for interest rate reductions, political and economic uncertainties, central bank purchases, and inflows to gold exchange-traded fund.

Tuesday marked the seventh day of the U.S. Government shutdown. The shutdown has delayed the release of important economic indicators. This forces investors to rely upon secondary, nongovernment data in order to determine the timing and magnitude of Fed rate reductions.

Investors now expect a 25 basis-point reduction at the Fed's meeting in this month. An additional 25 bp is expected in December.

The political turmoil in France, Japan and other countries has also increased demand for safe-haven gold.

Analysts say that a "fear of losing out" also drives the rally.

"What we are seeing is that investors continue to buy gold despite its high price, which is amplifying this move even further," said UBS Analyst Giovanni Staunovo.

Silver spot rose by 0.5%, to $48.03. Platinum gained 2.2%, to $1653.21, and palladium increased 1.3%, to $1355.32. (Reporting and editing by Sriraj Kalluvila, Christian Schmollinger and Anmol Choubey in Bengaluru)

(source: Reuters)