Gold prices held steady on Friday (October 3), poised for a seventh consecutive weekly gain, driven by expectations of further US interest rate cuts and concerns over the economic impact of a prolonged government shutdown.

Spot gold rose 0.03% to $3,857.25 an ounce at 09:21 GMT, after hitting a record high of $3,896.49 on Thursday. Bullion has gained 2.6% so far this week. US gold futures for December delivery rose 0.32% to $3,880.50 an ounce.

The prolonged US government shutdown, now in its third day since Friday, has delayed key economic data, including the non-farm payrolls report scheduled for release on Friday.

Alternative data from public and private sources suggests the US labor market likely remained stagnant in September, with slow hiring and no change in the unemployment rate.

The data suggests the Fed should cut interest rates, "and since we anticipate further rate cuts, this should further support gold prices in the coming months, with expectations that the yellow metal will break through the $4,000/oz mark by the end of this year," said UBS analyst Giovanni Staunovo.

Investors are pricing in a 97% probability of a 25 basis point rate cut in October and an 88% probability of a similar cut in December, according to the CME Group's FedWatch tool. Federal Reserve Bank of Dallas President Lorie Logan said the Fed had taken some appropriate insurance against a sharp downturn in the labor market with last month's rate cut, but needed to be "cautious."

Gold, often used as a safe store of value during times of political and financial uncertainty, thrives in a low-interest environment. Bullion prices have risen 47% so far this year.

Meanwhile, physical gold demand in India increased this week despite record-high prices, while markets in China were closed for a holiday. Elsewhere, spot silver rose 0.6% to $47.24 an ounce, platinum rose 0.5% to $1,576.25, and palladium rose 1.4% to $1,258.25. (alg)

Source: Reuters