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Gold surges to record highs, reaches $4000 mark

Gold continued its record-breaking rally Tuesday, hovering only $22 short of the $4,000 an ounce milestone. This was driven by expectations that the Federal Reserve will cut rates later this month, and the persistent demand for safe-haven assets amid the ongoing U.S. Government shutdown.

Gold spot was up 0.4% at $3,978.01 an ounce as of 0923 ET (1323 GMT) after reaching a high of $3985.48 in the earlier session.

U.S. Gold Futures for December Delivery rose by 0.6%, to $4,000.90. This marks the first time that the $4,000/oz mark has been breached.

There is no indication that the situation will be resolved within the next few months. There's still some interest in gold, according to Peter Grant. He is the senior metals analyst at Zaner Metals and vice president.

Gold that does not yield, which is more likely to perform well in times of uncertainty or low interest rates, has gained 52% this year. The metal's rise has been driven by several factors including the expectation of interest rate reductions, political and economic uncertainties, central bank purchases, and inflows to gold ETFs.

The U.S. shutdown reached its seventh day Tuesday. 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.

For a second consecutive day, currency and bond market volatility was dominated by political turmoil in France as well as Japan.

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

Data from the People's Bank of China revealed that China's central banks added gold to their reserves for the 11th consecutive month in September.

Goldman Sachs increased on Monday its December 2020 gold price forecast from $4,300 to $4,900, citing large inflows of Western exchange-traded funds (ETFs) and possible central bank purchases.

The price of spot silver fell by 0.4% to $48.31 an ounce. Platinum was down 0.1% at $1,624.63 while palladium rose 1.6% to $1,340.68. (Reporting by Anushree Mukherjee in Bengaluru; Editing by Vijay Kishore)

(source: Reuters)