PRECIOUS-Fed rate cut optimism, safe-haven demand fuel gold's rally beyond $4,200

By Anushree Mukherjee

Oct 15 (Reuters) - Gold extended its rally to breach $4,200-per-ounce for the first time on Wednesday on expectations of more U.S. interest rate cuts, while broader economic and geopolitical uncertainty also led investors to buy the safe-haven metal.

Spot gold XAU= was up 1.4% at $4,200.12 per ounce as of 1202 GMT, after touching a record high of $4,217.95 earlier in the session. U.S. gold futures GCcv1 for December delivery gained 1.3% to $4,216.20.

Gold has risen about 59% so far this year, fuelled by geopolitical and economic uncertainties, expectations of U.S. rate cuts, strong central bank buying, a broader de-dollarisation trend and robust exchange-traded fund inflows.

"Prolongation of the U.S. government shutdown, more dovish comments from Fed officials, and the continued escalation of trade tensions between the U.S. and China are likely to support further gains in gold prices," said ActivTrades analyst Ricardo Evangelista.

"Reaching the $5,000 level does not seem impossible in the medium to long term."

The U.S. dollar dropped against a basket of peers on Wednesday after comments from Federal Reserve Chair Jerome Powell bolstered bets on a series of rate cuts in coming months.

Traders are pricing in a 25 basis-point cut in October with another in December, seen as 96% and 93% chances respectively. FEDWATCH

Meanwhile, U.S. President Donald Trump said Washington was considering cutting some trade ties with China, after both countries began imposing tit-for-tat port fees on Tuesday.

Markets are also closely monitoring the risks related to the ongoing government shutdown in the United States.

The shutdown , which has turned off the official flow of data, could begin clouding the view for policymakers in Japan and other countries.

Gold, traditionally seen as a hedge against political and economic uncertainty and inflation, also tends to do well in low-interest rate environments.

"We are expecting the bull run in gold to continue," said Soni Kumari, a commodity strategist at ANZ.

Silver XAG= rose 2.9% to $52.99, after having hit a record high of $53.60 on Tuesday, tracking gold's rally and amid tightening supply in the spot market.

Elsewhere, platinum XPT= climbed 1.7% to $1,658.76 and palladium XPD= rose 2.6% to $1,564.65.