Gold hits new record high as US shutdown, Fed cut bets drive demand

SINGAPORE: Gold prices surged to a new record on Tuesday as uncertainty deepened over the ongoing US government shutdown, while growing expectations of a Federal Reserve rate cut later this month continued to lift investor sentiment.

Spot gold inched up 0.1 percent to $3,965.39 per ounce by 0308 GMT, after briefly touching an all-time high of $3,977.19 earlier in the day. US gold futures for December delivery gained 0.3 percent to $3,988.10.

Political deadlock fuels safe-haven demand

The rally came as the deadlock between the two chambers of the US Congress showed no sign of easing, raising fears that the government shutdown could drag on. Investors turned to gold as a safe haven amid the political uncertainty.

“The chances of rate cuts in October and December remain above 80 percent, and that is supporting gold prices,” said Kelvin Wong, senior market analyst at OANDA. “The government shutdown, with no resolution yet in sight, is another major driver.”

Although Kansas City Fed Bank President Jeff Schmid hinted that he is not in favour of further rate cuts, markets still expect two more reductions this year. The CME FedWatch tool showed a 95 percent probability of a 25 basis-point cut in October and an 83 percent chance of another in December.

Gold’s strong year continues

Gold, which offers no yield, tends to perform well when interest rates are low and investors seek safety during economic or political uncertainty. The metal has already climbed about 51 percent so far this year, driven by strong central bank purchases, rising demand for gold-backed exchange-traded funds (ETFs), a weaker US dollar, and growing interest from retail investors looking to hedge against global risks.

Adding to the bullish outlook, Goldman Sachs raised its December 2026 gold price forecast to $4,900 per ounce from $4,300, citing strong Western ETF inflows and continued central bank buying.

In other precious metals, spot silver slipped 0.1 percent to $48.49 per ounce, platinum fell 0.4 percent to $1,619.62, while palladium edged up 0.1 percent to $1,325.71.

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