Gold continues record run on safe-haven rush, US rate cut bets

• Top US officials blast China's rare earths curbs
• Gold holds above the $4,200/oz level
• Shutdown could cost US economy $15 billion a week, Treasury says

By Anushree Mukherjee

Oct 16 (Reuters) - Gold extended its rally to a new record high on Thursday, as investors turned to the safe-haven asset due to U.S.-China trade tensions and the U.S. government shutdown, with prospects of interest rate cuts further boosting demand.

Spot gold XAU= was up 0.7% at $4,235.41 per ounce, as of 1012 GMT. Earlier, bullion touched a record high of $4,243, climbing for a fifth consecutive session.

U.S. gold futures GCcv1 for December delivery were up 1.2% at $4,252.30.

Gold, traditionally seen as a store of value during times of instability, has risen 61% year-to-date.

FOCUS ON TRADE SPAT

Investors' focus this week has been on the trade spat between the world's biggest economies, with U.S. officials on Wednesday criticising China's major expansion of rare earth export controls as a threat to global supply chains.

"Renewed trade frictions (are) adding to uncertainty across global supply chains... investors are increasingly turning to gold," said Nitesh Shah, commodities strategist at WisdomTree, adding that gold's breakout also reflects investor unease over U.S. policy credibility.

There is a strong likelihood the metal remains above the $4,200 level, Shah added.

Gold's rally has been driven by a number of factors, including expectations of interest rate cuts, political and economic uncertainty, solid central bank buying, inflows into gold exchange-traded funds and a weak dollar.

Meanwhile, the two-week-old federal government shutdown may cost the U.S. economy as much as $15 billion a week in lost production, a Treasury official said on Wednesday.

On the monetary policy front, traders are pricing in a 25 basis-point cut by the U.S. Fed in October with another in December, seen as 98% and 95% chances respectively. FEDWATCH

Non-yielding gold typically performs well in a low interest-rate environment.

"To get to $5,000 in 2026, the market would likely need to see physical demand hold steady but a further upswing in financial demand for gold allocations," said Aakash Doshi, head of gold metals strategy, State Street Investment Management.

Spot silver XAG= fell 0.4% to $52.88 per ounce, after hitting a record high of $53.60 on Tuesday, tracking gold's rally and supported by tightness in the spot market.

Platinum XPT= rose 0.9% to $1,669.60 and palladium XPD= edged up 0.3% to $1,540.25.