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Gold reaches record highs on US shutdown fears and rate-cut betting

Gold reached a new record on Wednesday, as investors flocked to safe-haven investments amid growing concerns about a U.S. shutdown. Meanwhile, weaker labour statistics boosted expectations for further Federal Reserve interest rate reductions.

By 0206 GMT, spot gold had risen 0.4% to $3872.87 an ounce. U.S. Gold Futures for December Delivery gained 0.7%, reaching $3,901.40.

Dollar-priced Gold is now more affordable to overseas buyers thanks to the dollar index.

Nicholas Frappell is the global head of institutional market at ABC Refinery. He said that gold was benefitting from "concerns about a weaker US dollar and the political situation in the U.S. with the standoff over a government shut down and also the general geopolitical uncertainties".

The U.S. Senate has failed to pass legislation extending funding for the government, pushing it closer to a possible shutdown. President Donald Trump also threatened further federal staff cuts.

The shutdown may delay the release Friday of important economic data including the non-farm employment report.

The JOLTS report released on Tuesday showed a marginal increase in U.S. jobs openings for August. This was accompanied by a decrease in hiring. These results indicate softer labour market conditions.

According to CME Group’s FedWatch tool, traders priced in a 97% probability of a 25 basis-point cut this month, and a 76% likelihood in December.

ADP's National Employment Report is due to be released later today and should provide more insight into the labour markets.

Michael Hsueh of Deutsche Bank, precious metals analyst said that it was difficult to predict an end to the gold rally.

Due to its low-interest rate nature, gold, which is a traditional hedge for economic and political uncertainties, thrives. It has risen by more than 47% in the past year.

Silver spot also rose 1.5%, to $47.39 an ounce. This is a record high for more than 14 years. Palladium rose 0.9% to $1,267.75, while platinum gained 1.4% at $1,595.85. (Reporting and editing by Sherry Phillips and Subhranshu SAHU in Bengaluru, Anmol Choubey and Anjana Anil from Bengaluru).

(source: Reuters)