PRECIOUS-Gold heads for seventh weekly gain on US shutdown fears, rate cut expectations

By Anmol Choubey and Anushree Mukherjee

Oct 3 (Reuters) - Gold prices held steady on Friday, poised for a seventh consecutive weekly rise, as expectations of further U.S. interest rate cuts and concerns over the economic impact of a prolonged government shutdown lent support.

Spot gold XAU= rose 0.1% to $3,861.04 per ounce by 1128 GMT, after hitting a record high of $3,896.49 on Thursday. The bullion has gained 2.7% so far this week.

U.S. gold futures GCcv1 for December delivery rose 0.4% to $3,884.30 per ounce.

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

Alternate data from public and private sources, showed the U.S. job market likely remained stalled in September with sluggish hiring and no change in unemployment rates.

The data suggests Fed should cut rates, "and as we anticipate further rate cuts, this should support the gold price further over the coming months, looking for the yellow metal to breach 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 reduction in October and an 88% likelihood of another similar cut in December, according to CME Group's FedWatch tool.

Federal Reserve Bank of Dallas President Lorie Logan said the Fed appropriately took out some insurance against any sharp deterioration in the labour market with its rate cut last month, 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-rate environment. Bullion has risen 47% so far this year.

Meanwhile, physical gold demand in India rose this week despite record high prices, while Chinese markets were closed for a holiday. GOL/AS

Elsewhere, spot silver XAG= climbed 1.1% to $47.46 per ounce, platinum XPT= rose 0.5% to $1,576.17 and palladium XPD= gained 1.2% to $1,255.43.

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