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Gold reaches record high of $3,900/oz due to Fed rate cuts and global uncertainty

Gold reached an all-time record high of $3,900 per troy ounce on Sunday, boosted by expectations that the Federal Reserve will cut rates this month as well as growing economic and political uncertainties in the U.S.

As of 13:41 GMT the spot gold price was up 1.4% at $3,941.63 an ounce after reaching a session high of $3.949.34.

U.S. Gold Futures for December Delivery rose by 1.5%, to $3.967.70 an ounce.

Edward Meir, Marex analyst, says that the current U.S. shutdown, rising Japanese yields in response to inflation fears, and political developments in France are all factors contributing to gold's rise. Sebastien lecornu, the new French Prime Minister, and his cabinet resigned hours after taking up office on Monday. This deepened France's political crisis. After Japan's ruling party appointed fiscal and monetary dove Sanae Tachichi as its leader on Saturday, the yen came under pressure. The U.S. shutdown is now in its sixth day. White House officials are threatening to lay off large numbers of federal workers. The gold price has increased by 50% this year, a record-breaking run, fueled by the expectation of Federal Reserve rate reductions, central bank purchases and a resilient safe haven demand. In March, spot gold prices broke through the $3,000/oz mark for the first and reached $3,800 by late September.

Meir said that the fact that we are so close to $4/oz suggests that some funds may be pushing it up in order to reach that mark.

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

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

UBS stated in a report that they expect gold to reach $4200/oz at the end of the year.

Spot silver rose 1.4% to reach its highest level since more than 14 year. Palladium rose 2.8% and platinum gained 2.3%, to reach $1,295.75. (Reporting and editing by Sharon Singleton in Bengaluru, Anushree Mokherjee, John Biju)

(source: Reuters)