Gold rallied – after a five-day rally that reached a new record – as the US government shutdown deepened and traders increased bets on a Federal Reserve interest rate cut following weak private payroll data.

Gold traded near $3,880 an ounce, about $15 below its high reached on Wednesday, with the suspension of federal operations threatening to delay crucial economic data needed by the Fed to make interest rate decisions.

This has left economists, traders, and policymakers more reliant on non-government data, such as Wednesday's ADP Research report, which showed a sharp decline in private sector payrolls in September.

Non-farm payrolls, originally scheduled for release on Friday, will be delayed due to the government shutdown – which also risks increasing pressure on the dollar. Traders have increased bets that the Fed will cut interest rates two more times this year to support the weakening labor market. Lower borrowing costs tend to boost non-yielding gold, which also becomes cheaper for most buyers when the US dollar weakens.

The metal has surged 48% this year, putting it on track for its biggest annual gain since 1979. The rally has been supported by central bank buying and rising holdings in gold-backed exchange-traded funds, as the Fed continues to cut interest rates.

Monthly inflows into gold-backed exchange-traded funds in September were the largest in three years, according to data compiled by Bloomberg. Chinese buyers are also snapping up more gold-backed funds, with the four most popular funds recording inflows last month after a period of sluggish demand.

Elsewhere, the US Supreme Court on Wednesday refused to allow President Donald Trump to immediately oust Fed Chair Lisa Cook while she sues to keep her job. The ruling—a setback to his efforts to strengthen control over the central bank—could ease concerns about the Fed's potential loss of independence, potentially lowering demand for safe-haven assets like gold.

Spot gold edged up 0.5% to $3,884.75 an ounce at 12:22 p.m. in London. The Bloomberg Dollar Spot Index weakened 0.1%. Silver edged higher, after hitting a 14-year high on Wednesday. Platinum and palladium gained. (alg)

Source: Bloomberg