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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.

Gold spot was up 1.8% to $3,956.19 an ounce at 02:41 pm ET (1441 GMT), having hit a session high of $3969.91.

U.S. Gold Futures for December Delivery settled 1.7% higher, at $3.976.3 an ounce.

Marex analyst Edward Meir said that the gold rally is being driven by a number of factors, including political developments in France, rising Japanese rates amid inflation fears, and the current U.S. shutdown.

Sebastien Lecornu, the new French Prime Minister, and his cabinet resigned Monday, just hours after taking up office. This deepened France's political crisis.

The U.S. shutdown has now entered its sixth day. Meanwhile, the White House is threatening to lay off thousands of federal workers.

Gold prices have risen 50% this year, a record-breaking run, fueled by the expectation of Fed rate reductions, central bank purchases and a resilient safe-haven market. In March, spot gold prices broke through the $3,000/oz mark for the first and reached $3,800 at the end of 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 $48,66 an ounce, its highest level for more than 14-years. Palladium rose 4.3%, to $1315.17, while platinum rose 1.4%, to $1626.75. (Reporting and editing by Sharon Singleton and Chris Reese in Bengaluru, with additional reporting by Sarah Qureshi and Shalsh Kuber. Additional reporting was by Anushree mukherjee from Bengaluru and John Biju.

(source: Reuters)