Gold rallies to record high on US government shutdown and Fed rate cut bets

Gold prices surged to a record high on Wednesday, lifted by a weaker dollar and safe-haven demand after a US government shutdown, while softer jobs data reinforced expectations that the Federal Reserve will cut interest rates this month.

Spot gold was up 0.1% at USD 3,861.77 an ounce at 01:48 p.m. ET (1748 GMT) after touching a record peak of USD 3,895.09.

US gold futures for December delivery settled 0.6% higher at USD 3,897.5.

The dollar weakened against a basket of other leading currencies, making dollar-priced gold more affordable for overseas buyers.

“The dollar has been under pressure because, usually, when the government shuts down, the mood turns quite negative on the US,” said Marex analyst Edward Meir, adding that the dollar and US equity markets are among the casualties.

The soft ADP jobs report will not help the dollar, he said, noting how a slowing economy and lower interest rates are bullish for gold.

US private payrolls decreased by 32,000 jobs in September after a downwardly revised 3,000 decline in August. Economists polled by Reuters had forecast private employment increasing 50,000 after a previously reported 54,000 advance in August.

The US government has shut down large parts of its operations, potentially putting thousands of federal jobs at risk, after partisan divisions prevented Congress and the White House from reaching a funding deal.

The shutdown could delay the release of economic indicators, including the closely watched non-farm payrolls (NFP) report scheduled for Friday.

Non-yielding gold, viewed as a safe-haven asset in times of economic and geopolitical uncertainty, thrives when interest rates are low.

Investors are pricing in a 99% chance of a rate cut this month, the CME FedWatch Tool shows.

“We are now seeing increased appetite from Western investors, both institutional and retail, as a case of ‘FOMO’ kicks in … Should this trend continue, we would not be surprised to see gold prices break above USD 4,000/oz,” SP Angel analysts said in a note.

Among other precious metals, spot silver gained 1.6% to a more-than-14-year high of USD 47.42 an ounce, platinum lost 1.6% to USD 1,549.17, and palladium was down 1.1% at USD 1,243.31.

(Reporting by Noel John and John Biju in Bengaluru; Editing by David Goodman and Sahal Muhammed)