Gold prices surged above $3,800 per oz for the first time on Monday, boosted by growing speculation of a US Federal Reserve interest rate cut, weakening the dollar, while concerns over a possible US government shutdown boosted demand for safe-haven assets.

Spot gold prices jumped 1.5% to $3,816.79 per oz at 09:23 GMT, after reaching $3,819.59 earlier in the session. US gold futures for December delivery rose 1% to $3,846.60.

The US dollar index fell 0.3%, making dollar-priced bullion cheaper for overseas buyers. US President Donald Trump will meet with Democratic and Republican leaders in Congress on Monday to discuss extending government funding. Without a deal, a government shutdown would begin on Wednesday.

"With the Fed expected to cut interest rates further over the next six months, I think the yellow metal has further upside potential, targeting $3,900/oz," said UBS analyst Giovanni Staunovo. "Concerns about a (US) government shutdown are also supporting demand for safe-haven assets like gold," he added.

The US Personal Consumption Expenditures (PCE) Price Index on Friday matched expectations, reinforcing speculation of further Fed rate cuts, with traders pricing a 90% chance of a 25 basis point rate cut in October and a 65% chance in December, according to the CME FedWatch Tool.

Gold, which benefits from lower interest rates and thrives amid geopolitical and economic uncertainty, has rallied more than 45% since the start of the year. Many brokers are optimistic about a gold price rally. SPDR Gold Trust, the world's largest gold-backed ETF (Exchange-Traded Fund), said its holdings rose 0.89% to 1,005.72 metric tons on Friday.

"We believe official demand and ETF holdings played a key role in gold's strength, while jewelry demand and recycled supply were the driving forces," Deutsche Bank said in a note. Elsewhere, spot silver rose 2.1% to $46.94 an ounce, reaching its highest level in more than 14 years, while platinum rose 2.5% to $1,606.77, its highest level in 12 years, and palladium rose 0.7% to $1,279.15.

"(Silver and platinum group metals) are responding to two main factors: increased industrial activity due to lower interest rates and higher inventory levels as countries seek to ensure adequate availability amid supply chain uncertainty," said independent analyst Ross Norman. (alg)

Source: Reuters