Gold saw increased demand as a safe haven this week amid growing confidence that U.S. lawmakers won't be able to prevent a government shutdown.
Gold prices hit new record highs during Asian trading on Tuesday, continuing their strong gains over the past week as markets worried about the seemingly imminent U.S. government shutdown.
Steady bets on further interest rate cuts by the US Federal Reserve also favored the metals markets, although silver and platinum retreated slightly after a rapid rally in the previous session. Copper prices also declined.
Spot gold reached an all-time high of $3,865.73 per ounce, while gold futures peaked at $3,893.72 per ounce. The yellow metal showed an increase of about 17% in the third quarter, as demand for safe assets was boosted by a number of factors.
Gold is growing amid the risk of a shutdown, increasing demand for protective assets
Congress has until midnight on September 30 (04:00 on Wednesday) to pass a spending bill and avoid the closure of hundreds of federal institutions.
A Republican-backed spending bill was recently able to pass the House of Representatives, but is now facing resistance in the Senate. Republicans have a 53-seat majority in the Senate, but at least 60 votes are required to approve the spending bill.
Bipartisan talks with President Donald Trump on Monday appeared to do little to break the political impasse, which centers around disagreements over healthcare spending and social security programs.
A government shutdown usually disrupts economic activity in a country, which can pose risks to growth. This week's shutdown may also delay the release of closely watched non-farm jobs data for September, which is due out on Friday.
The White House has also warned that thousands of government jobs could be cut if closed, a scenario that portends a further weakening of the labor market.
Metal prices heading for strong third quarter amid bets on rate cuts
Beyond gold, broader metal prices declined slightly on Tuesday, but showed strong growth in the third quarter amid growing optimism about lower U.S. interest rates.
The Fed cut rates by 25 basis points earlier this month and signaled the possibility of two more cuts this year – although this remains dependent on the trajectory of inflation and the labor market.
Several Fed officials have made cautious statements about future rate cuts over the past week. But markets have mostly maintained expectations of at least 25 basis points of decline in October, as shown by CME Fedwatch.
The prospect of lower rates weakened the dollar and supported metal prices, with precious metals performing the best in the sector.
Spot platinum is expected to add almost 18% in the third quarter, while spot silver is up 30%. Both metals also soared to more than a decade-old highs on Monday.
Among industrial metals, benchmark copper futures on the London Metal Exchange stabilized at $10,418.60 per tonne and rose 5% in the third quarter. COMEX copper futures held near $4.9 per pound and rose 11.4% in the third quarter.