By Anmol Choubey
(Reuters) – Gold prices surged above $3,800 an ounce for the first time on Monday, driven by rising bets on a U.S. Federal Reserve rate cut that weakened the dollar, while concerns over a possible U.S. government shutdown bolstered safe-haven demand.
Spot gold jumped 1.5% to $3,816.79 per ounce by 0923 GMT, after hitting $3,819.59 earlier in the session.
U.S. gold futures for December delivery rose 1% to $3,846.60.
The U.S. dollar index fell 0.3%, making greenback-priced bullion less expensive for overseas buyers. [USD/]
U.S. President Donald Trump will meet with the top Democratic and Republican leaders in Congress later on Monday to discuss extending government funding. Without a deal, a shutdown would begin from Wednesday.
“With the Fed set to cut further rates over the next six months, I think there should be more upside for the yellow metal, targeting a level of $3,900/oz,” said UBS analyst Giovanni Staunovo.
“Concern about the (U.S.) government shutdown are also supporting demand for safe haven assets like gold,” he added.
The U.S. Personal Consumption Expenditures (PCE) Price Index on Friday matched expectations, reinforcing bets on further Fed rate cuts, with traders assigning a 90% chance of a 25-basis-point cut in October and a 65% probability for December, according to the CME FedWatch Tool.
Gold, which benefits from lower interest rates and thrives during geopolitical and economic uncertainty, has gained more than 45% year-to-date. Many brokerages have turned bullish on the rally in gold prices.
SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.89% to 1,005.72 metric tons on Friday.
“We think official demand and ETF holdings are playing a pivotal role in gold strength, while jewellery demand and recycled supply are restraining factors,” Deutsche Bank said in a note.
Elsewhere, spot silver rose 2.1% to $46.94 per ounce, hitting a more than 14-year high, while platinum climbed 2.5% to $1,606.77, a 12-year high, and palladium gained 0.7% to $1,279.15.
“(Silver and platinum-group metals) are responding to two primary things – increased industrial activity on rate cuts and higher levels of inventory holding as nations seek to ensure they have adequate availability in a world of supply chain uncertainty,” said independent analyst Ross Norman.
(Reporting by Anmol Choubey and Anushree Mukherjee in Bengaluru; Editing by Jamie Freed)
