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Gold rises above $3,900 for the first time due to safe-haven demand

Gold prices reached an all-time record high on Monday. They soared above the $3,900 per ounce level as investors sought out safe-haven gold amid the U.S. shutdown, economic uncertainty and expectations of future Federal Reserve rate reductions.

As of 0730 GMT spot gold rose 1.2% to $3,932.40 an ounce after reaching $3,944 in the earlier session.

U.S. Gold Futures for December Delivery climbed 1.2%, to $3.956.50.

A senior White House official stated on Sunday that Washington would begin mass layoffs if U.S. president Donald Trump determines that negotiations with Congress Democrats to end the partial government shutdown "absolutely are going nowhere".

The U.S. shutdown could be prolonged, which would have a negative effect on the U.S. economy. Independent analyst Ross Norman said that there is a general sense of caution among financial markets.

The gold price has increased by nearly 50% this year. This is due to strong central bank purchases, an increase in demand for exchange-traded fund (ETF) backed with gold, a lower dollar, and the growing interest of retail investors looking to hedge against rising geopolitical and trade tensions.

Norman added that the low participation in this rally and its primary drivers, central banks and investors with a longer-term perspective, rather than speculative purchasers, could indicate that any pullback may be milder than anticipated.

Stephen Miran, the Fed Governor, called for a rate cut aggressively again on Friday. He cited the economic impact of Trump's policies.

Various data, both from public and private sources, indicate that the U.S. labour market is weakening due to the shutdown of the federal government.

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.

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

In March, spot gold prices broke through the $3,000 per ounce barrier for the first.

Many brokerages are now bullish about the rally.

Silver spot rose 1.5% to reach its highest price in over 14 years. Palladium rose 1.2% to 1,276.10 and platinum gained 0.7% to $1616.

(source: Reuters)