Gold prices increased to record a fresh all-time high on Thursday, aided by safe-haven buying after the U.S. government shut down most of its operations, with increasing expectations of a rate cut from the Federal Reserve this month enhancing the metal’s attractiveness.
Spot gold rose 0.9% to $3,891.96 per ounce, as of 0844 GMT, after recording an all-time high of $3,895.09 during the session.
December-delivery U.S. gold futures rose 1.2% to $3,918.60.
The dollar index dipped to 0.2% against the peers, its lowest in more than one week, which rendered greenback-priced gold cheaper to buy for foreign buyers.
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The dollar is softer on the back of dovish Fed expectations. This dynamic has picked up pace following a failed government spending bill attempt that led to a government shutdown that can weigh on economic output,” commented Ricardo Evangelista, senior analyst at ActivTrades.
The U.S. government closed down most of its operations, which may result in the loss of thousands of federal workers’ jobs, as severe partisan differences kept Congress and the White House from hammering out a funding agreement.
The shutdown may hamper the release of important economic information, such as the non-farm payrolls (NFP) report scheduled for Friday.
Non-yielding gold, which is perceived as a haven asset during periods of economic and geopolitical risk, flourishes where interest rates are low.
Probably the Fed doesn’t necessarily need (the NFP) report to decide because U.S. interest rates are still higher than the neutral rate, so monetary policy is tight and if the economy is decelerating, you have to get closer to the neutral rate at least,” said Carsten Menke, a Julius Baer analyst.
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Traders are betting on a 95% probability of a rate cut this month, according to the CME FedWatch Tool.
Later in the day, the ADP national employment report is forecast to provide further labour market readings.
Elsewhere, spot silver climbed 1.5% to $47.39 an ounce, a more than 14-year high. Platinum climbed 0.6% to $1,583.75, and palladium gained 0.5% at $1,263.44.
