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Investing.com-- Gold prices soared to a record high in early Asian trade on Monday amid a sharp weakening in the yen and as bets on lower U.S. interest rates remained squarely in play.
Bullion was also supported by persistent concerns over a U.S. government shutdown, which remained in place as lawmakers marked little progress towards a spending bill.
Spot gold jumped as much as 0.8% to a record high of $3,920.31 an ounce, while gold futures for December rose 0.8% to a peak of $3,944.45/oz.
Gains in gold came amid heightened volatility in foreign exchange markets, especially after the Japanese yen weakened sharply in morning trade. The yen slid after conservative politician Sanae Takaichi was elected as the leader of Japan’s ruling Liberal Democratic Party, setting her up to become the next prime minister.
The yen’s USD/JPY pair, which gauges the amount of yen required to purchase one dollar, jumped 1.4% to 149.58 yen.
Takaichi is viewed as fiscally dovish, and is expected to oppose any further monetary tightening by the Bank of Japan. This notion battered the yen and Japanese bond markets.
In the U.S., markets were increasingly convinced the Federal Reserve will cut interest rates again in October. Traders were seen pricing in an over 99% chance for a 25 basis point cut later in October, CME Fedwatch showed.
The dollar was nursing losses on this notion, while Treasury yields also retreated.
An ongoing U.S. government shutdown also kept demand for gold largely in play, even as risk-driven markets in the country largely brushed off concerns over the impact of a shutdown.